-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CQUsuZAwu+lx0DiwsRUo+XnR/fzxS4Isa9UqhNLKUuOXCVSVE/2Wpabyc667oRGX l8YPqVwxiosT1NTJkwW6WA== 0000756976-99-000181.txt : 19991230 0000756976-99-000181.hdr.sgml : 19991230 ACCESSION NUMBER: 0000756976-99-000181 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19991222 EFFECTIVENESS DATE: 19991222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERKSHIRE FUNDS CENTRAL INDEX KEY: 0001030979 STANDARD INDUSTRIAL CLASSIFICATION: IRS NUMBER: 770449050 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 333-21089 FILM NUMBER: 99779191 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 811-08043 FILM NUMBER: 99779192 BUSINESS ADDRESS: STREET 1: C/O BERKSHIRE CAPITAL HOLDINGS INC STREET 2: 475 MILAN DR SUITE 103 CITY: SAN JOSE STATE: CA ZIP: 95134-2453 BUSINESS PHONE: 4085260707 MAIL ADDRESS: STREET 1: C/O BERKSHIRE CAPITAL HOLDINGS INC STREET 2: 475 MILAN DR SUITE 103 CITY: SAN JOSE STATE: CA ZIP: 95134 485BPOS 1 485BPOS FOR BERKSHIRE MUTUAL FUNDS As filed with the Securities and Exchange Commission on December 22, 1999 Securities Act Registration No. 333-21089 Investment Company Act Registration No. 811-08043 - - ------------------------------------------------------------------------------ ============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] Pre-Effective Amendment No. __ [ ] Post-Effective Amendment No. 5 [X] and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. 6 (Check appropriate box or boxes) ----------------------------------------------------------- THE BERKSHIRE FUNDS (Formerly Berkshire Capital Investment Trust) (Exact Name of Registrant as Specified in Charter) 475 Milan Drive, Suite #103 San Jose, CA 95134-2453 (Address of Principal Executive Offices) 1-877-526-0707 (Registrant's Telephone Number) ----------------------------------------------------------- AGENT FOR SERVICE: MALCOLM R. FOBES III The Berkshire Funds 475 Milan Drive, Suite #103 San Jose, CA 95134-2453 (Name and Address of Agent for Service) COPIES TO: DONALD S. MENDELSOHN, ESQ. Brown, Cummins & Brown 3500 Carew Tower 441 Vine Street Cincinnati, Ohio 45202 ----------------------------------------------------------- It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) of Rule 485. [ ] on (date) pursuant to paragraph (b) of Rule 485. [ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485. [ ] on (date) pursuant to paragraph (a)(1) of Rule 485. [x] 75 days after filing pursuant to paragraph (a)(2) of Rule 485. [ ] on (date) pursuant to paragraph (a)(2) of Rule 485. If appropriate, check the following box [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment. ----------------------------------------------------------- PART A THE BERKSHIRE FUNDS Berkshire Focus Fund Berkshire Technology Fund Prospectus [Outside front cover] P R O S P E C T U S December 29, 1999 BERKSHIRE FOCUS FUND For Investors Seeking Long-Term Capital Appreciation BERKSHIRE TECHNOLOGY FUND For Investors Seeking Long-Term Capital Appreciation As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved of these securities, nor has the Commission determined that this Prospectus is complete or accurate. Any representation to the contrary is a criminal offense. [LOGO] THE BERKSHIRE FUNDS 475 Milan Drive, Suite #103 San Jose, California 95134-2453 TABLE OF CONTENTS The Funds 4 - - --------------------------------------------------------------------- The Objective of the Funds...................................... 4 The Principal Investment Strategies and Policies of the Funds... 4 The Principal Risks of Investing in the Funds................... 7 Who Should Invest............................................... 8 Performance History............................................. 9 Costs of Investing in the Funds................................. 10 Expense Example................................................. 11 Additional Investment Strategies and Risk Considerations........ 11 Who Manages the Funds 14 - - --------------------------------------------------------------------- The Investment Adviser.......................................... 14 The Portfolio Manager........................................... 14 How to Buy and Sell Shares 15 - - --------------------------------------------------------------------- Pricing of Fund Shares.......................................... 15 Investing in the Funds.......................................... 16 Minimum Investments For Each Fund............................... 16 Types of Account Ownership...................................... 17 Instructions For Opening and Adding to an Account............... 18 Telephone and Wire Transactions................................. 19 Tax-Deferred Plans.............................................. 20 Types of Tax-Deferred Accounts.................................. 21 Automatic Investment Plans...................................... 22 Instructions For Selling Fund Shares............................ 22 Additional Redemption Information............................... 24 How to Exchange Shares.......................................... 26 Shareholder Communications...................................... 26 Dividends and Distributions..................................... 26 Taxes........................................................... 27 Financial Highlights 28 - - --------------------------------------------------------------------- Prospectus 2 YOUR GUIDE TO THE PROSPECTUS This Prospectus is designed to help you make an informed decision about whether investing in the Berkshire Focus Fund ("Focus Fund") or the Berkshire Technology Fund ("Technology Fund") is appropriate for you. Please read it carefully before investing and keep it on file for future reference. When we are discussing the Focus Fund and the Technology Fund together, we will refer to them as the "Funds." The investment adviser for both Funds is Berkshire Capital Holdings, Inc. (the "Adviser"). To make this Prospectus easy for you to read and understand, we have divided it into four sections. Each section is organized to help you quickly identify the information that you are looking for. The first section, The Funds, contains a discussion of the objective, investment strategies and policies, risks, performance history and costs of investing in each Fund. In particular, this section tells you four important things about each Fund that you should know before you invest: * Each Fund's investment objective - what the Fund is trying to achieve. * The principal investment strategies of each Fund - how the Fund tries to meet its investment objective. * The investment selection process used by each Fund - how the Fund chooses its primary investments. * Risks you should be aware of - the principal risks of investing in each Fund. The other three sections of the Prospectus - Who Manages the Funds, How to Buy and Sell Shares, and Financial Highlights - provide you with detailed information about how the Funds are managed, the services and privileges that are available to you, how shares are priced, how to buy and sell shares, and financial information about each Fund. Prospectus 3 THE FUNDS THE OBJECTIVE OF THE FUNDS * Each Fund's investment objective is long-term capital appreciation. Any income received is incidental to this objective. THE PRINCIPAL INVESTMENT STRATEGIES AND POLICIES OF THE FUNDS * The Focus Fund invests primarily in the common stocks of large companies, normally a core position of 20-30 common stocks selected for their long-term growth potential. * The Technology Fund, under normal market conditions, invests at least 65% of its assets in the securities of companies engaged in the development, production, or distribution of technology-related products or services. These types of products and services currently include office and business equipment; computer hardware and software; peripherals; mass storage devices; semiconductors; data networking and telecommunications equipment; and Internet-related products and services. The Fund may invest in both small and large companies, without regard to their size. [Side panel: Each Fund's objective may be changed by the Board of Trustees without shareholder approval. You will receive advance written notice of any material changes to your Fund's objective. If there is a material change, you should consider whether the Fund remains an appropriate investment for you.] [Side panel: Large vs. Small companies: Both Funds invest in the equity securities of large companies. Large companies are often referred to as "large capitalization" companies because they typically have a market capitalization of $5 billion or more. The Technology Fund also invests in the equity securities of small and mid-sized companies. These "small and mid- capitalization" companies typically have a market capitalization of less than $5 billion. Market capitalization is calculated by multiplying the number of shares outstanding by the stock price of the company.] Prospectus 4 * Each Fund concentrates its investments in the technology industry, which means at least 25%, and as much as 100%, of the Fund's total assets can be invested in that particular industry. * Each Fund invests primarily in growth companies whose revenues and earnings are likely to grow faster than the economy as a whole, offering above-average prospects for capital appreciation and little or no emphasis on dividend income. * Each Fund is a "non-diversified" portfolio, which means that it can invest in fewer securities at any one time than diversified portfolios. * Under adverse market conditions, when investment opportunities are limited, or in the event of exceptional redemption requests, each Fund may hold cash or cash-equivalents and invest without limit in obligations of the U.S. Government and its agencies and in money market securities, including high-grade commercial paper, certificates of deposit, repurchase agreements and short-term debt securities. Under these circumstances, the Funds may not participate in stock market advances or declines to the same extent that they would if they remained more fully invested in common stocks. As a result, each Fund may not achieve its investment objective. The Investment Selection Process Used by the Funds In selecting investments for the Funds, the Adviser focuses on industry leaders with dominant franchises and strong growth prospects. The Adviser also uses an approach that combines "top down" economic analysis with an emphasis on "bottom up" stock selection. * The "top down" approach considers such macro-economic factors as interest rates, inflation, gross domestic product, unemployment, inventories, tax rates, and the regulatory environment, as well as global trends, the overall competitive [Side panel: Mutual funds generally emphasize either "growth" or "value" styles of investing. Growth funds invest in companies that exhibit faster-than-average growth in revenues and earnings, appealing to investors who are willing to accept more volatility in hopes of a greater increase in share price. Value funds in-vest in companies that appear underpriced according to certain financial measurements of their intrinsic worth or business prospects. Value funds appeal to investors who want some dividend income and the potential for capital gains, but are less tolerant of share-price fluctuations. Both Funds invest primarily in growth companies.] [Side panel: All mutual funds must elect to be "diversified" or "non-diversified." As a non-diversified portfolio, each Fund may invest half of its total assets in two or more securities, while the other half is spread out among investments not exceeding 5% of the Fund's total assets at the time of purchase. As a result, each Fund has the ability to take larger positions in a smaller number of securities than diversified portfolios. These limitations do not apply to U.S. Government securities.] Prospectus 5 landscape, industry consolidation and the sustainability of the economic trends to predict the direction of the economy. As a result, the Adviser attempts to identify sectors, industries, and companies which should benefit from the overall trends. * Upon completion of its "top down" analysis, the Adviser then takes a "bottom up" approach to selecting individual companies that are most likely to benefit from the observed trends. In other words, the Adviser seeks to identify individual companies with earnings growth potential that may not be recognized by the market at large. * In determining whether to invest in a particular company, the Adviser focuses on a number of different attributes, including the company's specific market expertise or dominance, its franchise durability, sustainable revenue and earnings growth, pricing power, strong balance sheet, improving return on equity, the ability to generate free cash flow, and experienced, motivated, and creative management. * The Adviser may also implement fundamental security analysis of individual companies which have been identified through the "bottom up" approach. As part of its fundamental research, the Adviser may rely upon specific sources of information including general economic and industry data as provided by the U.S. Government, various trade associations and other sources, brokerage research reports, and published corporate financial data such as annual reports, 10-Ks, and quarterly statements, as well as direct interviews with company management. The Adviser also reviews traditional financial data such as price-sales and earnings ratios, return on assets and equity, gross and net margins, inventory turns, book value, and debt-equity ratios. The Adviser may, from time-to-time, employ dividend and cash flow discounting models to determine the company's intrinsic value which it then compares to the company's current share price. [Side panel: Fundamental vs. Technical Analysis: There are two major schools of stock market analysis used in determining whether a particular stock or group of stocks are undervalued or overvalued relative to their current market price. The first major school is "fundamental analysis" which relies on an analysis of the balance sheet and income statements of companies in order to forecast their future stock price movements. The other major school is "technical analysis" which is not concerned with the financial position of a company, but instead relies on price and volume movements through the use of charts and computer programs to identify and project trends in a market or security. The Adviser relies on fundamental analysis in selecting portfolio securities for the Funds.] Prospectus 6 THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS Risks in General Domestic and foreign economic growth and market conditions, interest rate levels, and political events are among the factors affecting the securities markets of the Funds' investments. There is the risk the Adviser will not accurately predict the direction of these and other factors and, as a result, the Adviser's investment decisions may not accomplish what they were intended to achieve. You could lose money investing in the Funds. You should consider your own investment goals, time horizon, and risk tolerance before investing in either Fund. An investment a Fund may not be appropriate for all investors and is not intended to be a complete investment program. Risks of Investing in Common Stocks (Both Funds) Both Funds invest primarily in common stocks, which subjects the Funds and their shareholders to the risks associated with common stock investing. These risks include the financial risk of selecting individual companies that do not perform as anticipated, the risk that the stock markets in which the Funds invest may experience periods of turbulence and instability, and the general risk that domestic and global economies may go through periods of decline and cyclical change. Many factors affect an individual company's performance, such as the strength of its management or the demand for its product or services. You should be aware that the value of a company's share price may decline as a result of poor decisions made by management or lower demand for the company's products or services. In addition, a company's share price may also decline if its earnings or revenues fall short of expectations. There are overall stock market risks that may also affect the value of each Fund. Over time, the stock markets tend to move in cycles, with periods when stock prices rise generally and periods when stock prices decline generally. The value of each Fund's investments may increase or decrease more than the stock markets in general. Risk of Non-Diversification (Both Funds) As previously mentioned, each Fund is a non-diversified portfolio, which means that it has the ability to take larger positions in a smaller number of securities than a portfolio that is "diversified." Non-diversification increases the risk that the value of the Fund could go down because of the poor performance of a single investment. Prospectus 7 Industry Risk (Both Funds) Industry risk is the possibility that stocks within the same industry will decline in price due to industry-specific market or economic developments. To the extent that each Fund concentrates its investments in the technology industry, the Funds are subject to the risk that companies in that industry are likely to react similarly to legislative or regulatory changes, adverse market conditions and/or increased competition affecting that market segment. Because of the rapid pace of technological development, there is the risk that the products and services developed by these companies may become rapidly obsolete or have relatively short product cycles. There is also the risk that the products or services offered by these companies will not meet expectations or even reach the marketplace. Although the Adviser currently believes that investments by the Funds in the technology industry will offer greater opportunity for growth of capital than investments in other industries, such investments can fluctuate dramatically in value and will expose you to greater than average risk. Small Company Risk (Technology Fund) The Technology Fund may invest a substantial portion of its assets in small and mid-capitalization companies. While smaller companies generally have the potential for rapid growth, they often involve higher risks because they lack the management experience, financial resources, product diversification and competitive strengths of larger corporations. In addition, in many instances the securities of smaller companies are traded only over-the-counter or on a regional securities exchange, and the frequency and volume of their trading is substantially less than is typical of larger companies. Therefore, the securities of smaller companies may be subject to wider price fluctuations. When making large sales, the Fund may have to sell portfolio holdings at discounts from quoted prices or may have to make a series of small sales over an extended period of time. Investments in smaller companies tend to be more volatile and somewhat more speculative. WHO SHOULD INVEST The Funds may be suitable for you if: * You are seeking growth of capital over the long-term - at least five years. * You can tolerate greater risks associated with common stock investments. * You are not looking for current income. * You characterize your investment temperament as "aggressive." * You are seeking funds that emphasize investments in technology-related companies. * You are willing to accept significant fluctuations in share price. * You are not pursuing a short-term goal or investing emergency reserves. Prospectus 8 Performance History The bar chart and table below show the variability of the Focus Fund's returns, which is one indicator of the risks of investing in the Fund. The bar chart shows the Fund's performance for 1998 together with the best and worst quarters since inception. The table compares the Fund's average annual returns for the periods indicated to those of broad-based securities market indices. The Technology Fund commenced operations on December 29, 1999. Performance results have not been provided because the Technology Fund has not yet been in existence for a full calendar year. As with all mutual funds, past results are not an indication of future performance. BERKSHIRE FOCUS FUND ========================================================================== (Total return as of 12/31/98)* ========================================================================== [HORIZONTAL BAR CHART] |================================================| 104.17% 1998 Total Return ========================================================================== Best Quarter (12-31-98) +58.06% Worst Quarter (9-30-98) -2.19% ========================================================================== * The Focus Fund's year-to-date return as of September 30, 1999 was 38.87%. Average annual total return for periods ended 12/31/98 ------------------------------------------------------ Since Inception 1 year (7/1/97) Berkshire Focus Fund 104.17% 46.46% Dow Jones Industrial Average(1) 18.13% 14.71% S&P 500 Index(2) 28.72% 26.44% NASDAQ Composite Index(3) 40.20% 32.75% ------------------------------------ (1) The Dow Jones Industrial Average is a measurement of general market price movement for 30 widely-held stocks listed on the New York Stock Exchange. (2) The S&P 500 is the Standard & Poor's composite index of 500 Stocks, a widely recognized, unmanaged idex of common stock prices. (3) The NASDAQ Composite Index is an unmanaged index which averages the trading prices of more than 3,000 domestic over-the-counter companies. Prospectus 9 COSTS OF INVESTING IN THE FUNDS The following table describes the expenses and fees that you may pay if you buy and hold shares of each Fund. Annual fund operating expenses are paid out of the assets of a Fund, so their effect is already included in the Fund's daily share price. Shareholder Fees (fees paid directly from your investment) ============================================================================== Focus Fund Technology Fund - - ------------------------------------------------------------------------------ Sales Charge (Load) Imposed on Purchases None None Deferred Sales Charge (Load) None None Sales Charge (Load) Imposed on Reinvested Dividends None None Redemption Fee None None Exchange Fee None None Annual Fund Operating Expenses(a) (expenses that are deducted from Fund assets) ============================================================================== Focus Fund Technology Fund - - ------------------------------------------------------------------------------ Management Fees 1.50% 1.50% 12b-1 Distribution Fees None None Other Expenses(b) 0.50% 0.50% Total Annual Fund Operating Expenses 2.00% 2.00% (a) The expense information for the Focus Fund has been restated to reflect fees in effect for 1999. (b) Fees payable under the Administration Agreement between each Fund and the Adviser are fixed at 0.50% of the Fund's average daily net assets up to $50 million, 0.45% of such assets from $50 million to $200 million, 0.40% of such assets from $200 million to $500 million, 0.35% of such assets from $500 million to $1 billion, and 0.30% of such assets in excess of $1 billion. [Side panel: The Funds are no-load investments, which means you do not pay any fees when you buy or sell shares of either Fund. As a result, all of your investment goes to work for you.] Prospectus 10 EXPENSE EXAMPLE The following example is intended to help you compare the cost of investing in each Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in a Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% annual return each year and that the Fund's operating expenses remain the same each year. Although your actual costs may be higher or lower, based on these assumptions your costs would be: Shareholder Transaction Expenses ============================================================================= One Year Three Years Five Years Ten Years - - ----------------------------------------------------------------------------- Focus Fund $203 $627 $1,078 $2,327 Technology Fund $203 $627 ADDITIONAL INVESTMENT STRATEGIES AND RISK CONSIDERATIONS General Both Funds invest primarily in common stocks and similar securities, including preferred stocks, warrants, securities convertible into common stock and securities purchased on a when-issued basis. Special Situations (Both Funds) Each Fund may invest in special situations. A special situation arises when the Adviser believes that the securities of an issuer will be recognized and appreciate in value due to a specific development with respect to that issuer. Developments creating a special situation might include significant changes in a company's allocation of its existing capital, a restructuring of assets, a redirection of free cash flows, a new product or process, a technological breakthrough, a management change or other extraordinary corporate event or a difference in market supply and demand for the security. The Fund's performance could suffer if the anticipated development in a "special situation" investment does not occur or does not attract the expected attention. [Side panel: Understanding expenses: Operating a mutual fund involves a variety of expenses including those for portfolio management, shareholder statements, tax reporting and other services. These expenses are paid from the Fund's assets in the form of a management fee and administrative fee. Their effect is already factored into the Fund's daily share price and returns.] Prospectus 11 Portfolio Turnover (Both Funds) Both Funds generally purchase securities for long-term investment although, to a limited extent, each Fund may purchase securities in anticipation of relatively short-term price gains. Short-term transactions may also result from liquidity needs, securities having reached a price or yield objective, changes in interest rates, or by reason of economic or other developments not foreseen at the time of the investment decision. Both Funds may also sell one security and simultaneously purchase the same or comparable security to take advantage of short-term differentials in securities prices. Changes are made in each Fund's portfolio whenever the Adviser believes such changes are desirable. Portfolio turnover rates are generally not a factor in making buy and sell decisions. Increased portfolio turnover may cause a Fund to incur higher brokerage costs, which may adversely affect the Fund's performance, and may produce increased taxable distributions. Options and Other Derivatives (Both Funds) Both Funds may use options on securities, securities indices and other types of derivatives primarily for hedging purposes. Each Fund may also invest, to a lesser degree, in these types of securities for non-hedging purposes, such as seeking to enhance returns. Derivatives are financial instruments whose value depends upon, or is derived from, the value of the underlying investment, pool of investments, or index. A Fund's return on a derivative typically depends on the change in the value of the investment, pool of investments, or index specified in the derivative instrument. Derivatives involve special risks and may result in losses. Both Funds will be dependent on the Adviser's ability to analyze and manage these sophisticated instruments. The prices of derivatives may move in unexpected ways, especially in abnormal market conditions. A Fund's use of derivatives may also increase the amount of taxes payable by shareholders. Foreign Securities (Both Funds) Each Fund may invest up to 15% of its net assets in foreign securities. These investments may be publicly traded in the United States or on a foreign exchange and may be bought and sold in a foreign currency. The Adviser generally selects foreign securities on a stock-by-stock basis based on growth potential. Foreign investments are subject to risks not usually associated with owning securities of U.S. issuers. These risks can include fluctuations in foreign currencies, foreign currency exchange controls, political and economic instability, differences in financial reporting, differences in securities regulation and trading, and foreign taxation issues. Prospectus 12 Fixed Income Securities (Both Funds) Under normal market conditions, each Fund may invest up to 15% of its total assets in all types of fixed income securities, including U.S. government obligations, and up to 10% of its total assets in high-yield bonds. Each Fund may also purchase fixed income securities on a when-issued, delayed delivery, or forward commitment basis. Fixed income securities are subject to credit risk and interest rate risk. Credit risk is the risk that a Fund could lose money if an issuer of a fixed income security cannot meet its financial obligations or goes bankrupt. Interest rate risk is the risk that a Fund's investments in fixed income securities may fall when interest rates rise. Investments in high-yield bonds are considered to be more speculative than higher quality fixed income securities. They are more susceptible to credit risk than investment-grade securities, especially during periods of economic uncertainty or economic downturns. The value of lower quality securities are subject to greater volatility and are generally more dependent on the ability of the issuer to meet interest and principal payments than higher quality securities. Issuers of high-yield securities may not be as strong financially as those issuing bonds with higher credit ratings. Short Sales (Technology Fund) The Technology Fund may enter into short sales. If this practice is used by the Fund, the intent would be to primarily hedge the Fund's portfolio by shorting against existing portfolio holdings or securities whose values are linked to various indices such as, Standard & Poor's Depository Receipts, Diamonds Trust, NASDAQ 100 Trust, and Merrill Lynch HOLDRs Trust. Investing for hedging purposes may result in certain transaction costs which may reduce the Fund's performance. In addition, there is no assurance that a short position will achieve a perfect correlation with the security that is being hedged against. Year 2000 Issue (Both Funds) Each Fund depends on the smooth functioning of computer systems in almost every aspect of its business. Like other mutual funds, financial and business organizations and individuals around the world, the Funds could be adversely affected if the computer systems used by the Adviser or the Funds' various service providers do not properly process and calculate date-related information and data on and after January 1, 2000. This possibility is commonly known as the "Year 2000 Issue." The Adviser has taken steps that it believes are reasonably designed to address the Year 2000 Issue with respect to computer systems that are used and to obtain reasonable assurances that comparable steps are being taken by the Funds' major service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact on the Funds. In addition, the Adviser cannot make any assurances that the Year 2000 Issue will not affect the companies in which each Fund invests or worldwide markets and economies. Prospectus 13 WHO MANAGES THE FUNDS THE INVESTMENT ADVISER Berkshire Capital Holdings, Inc. (the "Adviser" or "Berkshire Capital"), located at 475 Milan Drive, Suite #103, San Jose, California 95134, serves as the investment adviser to each Fund under an Investment Advisory Agreement with The Berkshire Funds (the "Trust"). Each Agreement provides that the Adviser will furnish continuous investment advisory and management services to the Fund. Berkshire Capital was organized in February 1993 and began serving as investment adviser to the Focus Fund in July 1997. Malcolm R. Fobes III is the controlling shareholder, Chairman and Chief Executive Officer of the Adviser. The Adviser manages the investment portfolio of each Fund, subject to policies adopted by the Trust's Board of Trustees. Under the Investment Advisory Agreements, the Adviser, at its own expense and without reimbursement from the Trust, furnishes office space and all necessary office facilities, equipment and executive personnel necessary for managing the Funds. Berkshire Capital also pays the salaries and fees of all officers and trustees of the Trust who are also officers, directors, or employees of Berkshire Capital. For its services, the Adviser receives a fee of 1.50% per year of the average daily net assets of each Fund. THE PORTFOLIO MANAGER Mr. Fobes manages the investment program of the Funds and is primarily responsible for the day-to-day management of each Fund's portfolio. He has been the portfolio manager of the Focus Fund since its inception in 1997 and the Technology Fund since its inception in 1999. Mr. Fobes founded Berkshire Capital in 1993 and is responsible for directing the company's investment programs in both public and private companies located in Silicon Valley. Prior to forming Berkshire Capital, Mr. Fobes was employed by Adobe Systems, Inc., a leading provider of digital publishing and imaging software technologies. Mr. Fobes holds a Bachelor of Science degree in Finance and Economics from San Jose State University in California. Prospectus 14 HOW TO BUY AND SELL SHARES PRICING OF FUND SHARES The price you pay for a share of a Fund, and the price you receive upon selling or redeeming a share of a Fund, is called the Fund's net asset value ("NAV"). The NAV is calculated by taking the total value of the Fund's assets, subtracting its liabilities, and then dividing by the total number of shares outstanding, rounded to the nearest cent: Total Net Assets - Liabilities Net Asset Value = ------------------------------ Number of Shares Outstanding The NAV is generally calculated as of the close of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time) every day the Exchange is open. All purchases, redemptions or reinvestments of Fund shares will be priced at the next NAV calculated after your order is received in proper form by the Fund's transfer agent, Mutual Shareholder Services, LLC (the "Transfer Agent"). Your order must be placed with the Transfer Agent prior to the close of the trading of the New York Stock Exchange in order to be confirmed for that day's NAV. The Funds' investments are valued at market value or, if a market quotation is not readily available, at the fair value determined in good faith by the Adviser, subject to the review and oversight of the Funds' Board of Trustees. The Funds may use pricing services to determine market value. Prospectus 15 INVESTING IN THE FUNDS You may purchase shares of either Fund directly through the Fund's Transfer Agent or through a brokerage firm or other financial institution that has agreed to sell the Fund's shares. If you are investing directly in a Fund for the first time, you will need to establish an account by completing a Berkshire Funds Account Application. (To establish an IRA, complete an IRA Application.) To request an application, call toll-free 1-877-526-0707 or visit our website at www.berkshirefunds.com to download an application. Your initial investment minimum can be found in the table below. The Funds reserve the right to change the amount of these minimums from time to time or to waive them in whole or in part for certain accounts. Lower investment minimums are available to investors purchasing shares through a brokerage firm or other financial institution. MINIMUM INVESTMENTS FOR EACH FUND ======================================================= Initial Additional ======================================================= Regular account $5,000 $500 Automatic Invesmtent Plan $2,500 $100* IRA account $2,000 $200 Education IRA $500 $100 - - ------------------------------------------------------- * An Automatic Investment Plan requires a $100 minimum automatic monthly or quarterly investment. All purchases must be made in U.S. dollars and checks must be drawn on U.S. banks. No cash, credit cards or third party checks will be accepted. A $20 fee will be charged against your account for any payment check returned to the Transfer Agent or for any incomplete electronic funds transfer, or for insufficient funds, stop payment, closed account or other reasons. If a check does not clear your bank or the Fund is unable to debit your predesignated bank account on the day of purchase, the Fund reserves the right to cancel the purchase. If your purchase is canceled, you will be responsible for any losses or fees imposed by your bank and losses that may be incurred as a result of a decline in the value of the canceled purchase. The Fund (or its agent) has the authority to redeem shares in your account(s) from either Fund to cover any losses due to fluctuations in share price. Any profit on such cancellation will accrue to the Fund. [Side panel: Investments made through brokerage firms or other financial institutions: If you invest through a brokerage firm or other financial institution, the policies and fees may be different than those described here. Financial advisers, financial supermarkets, brokerage firms, and other financial institutions may charge transaction and other fees and may set different minimum investments or limitations on buying or selling shares. Consult a representative of your financial institution if you have any questions. Your financial institution is responsible for transmitting your order in a timely manner.] Prospectus 16 Your investment in each Fund should be intended to serve as a long-term investment vehicle. The Funds are not designed to provide you with a means of speculating on the short-term fluctuations in the stock market. Each Fund reserves the right to reject any purchase request that it regards as disruptive to the efficient management of the Fund, which includes investors with a history of excessive trading. Each Fund also reserves the right to stop offering shares at any time. TYPES OF ACCOUNT OWNERSHIP You can establish the following types of accounts by completing a Shareholder Account Application: * Individual or Joint Ownership Individual accounts are owned by one person. Joint accounts have two or more owners. * A Gift or Transfer to Minor (UGMA or UTMA) An UGMA/UTMA account is a custodial account managed for the benefit of a minor. To open an UGMA or UTMA account, you must include the minor's social security number on the application. * Trust An established trust can open an account. The names of each trustee, the name of the trust and the date of the trust agreement must be included on the application. * Business Accounts Corporation and partnerships may also open an account. The application must be signed by an authorized officer of the corporation or a general partner of a partnership. [Side panel: Costs and market timing: Some investors try to profit from "market-timing" - switching money into investments when they expect the market to rise, and taking money out when they expect the market to fall. As money is shifted in and out by market timers, the Fund incurs expenses for buying and selling securities. These costs are borne by all Fund shareholders, including the long-term investors who do not generate the costs. Therefore, each Fund discourages short-term trading by, among other things, closely monitoring excessive transactions.] Prospectus 17 INSTRUCTIONS FOR OPENING AND ADDING TO AN ACCOUNT ......................................................................... TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT - - -------------------------------------------------------------------------- BY MAIL BY MAIL ......................................................................... Complete and sign the Account Complete the investment slip Application or an IRA Application. that is included with your account statement, and write your account Make your check payable to either number on your check. If you no the Berkshire Focus Fund or the longer have your investment slip, Berkshire Technology Fund. please reference your name, address, * For IRA accounts, please account number, and the Fund name specify the year for which on your check. the contribution is made. MAIL YOUR APPLICATION AND CHECK TO: MAIL THE SLIP AND THE CHECK TO: ......................................................................... The Berkshire Funds The Berkshire Funds c/o Mutual Shareholder Services, LLC c/o Mutual Shareholder Services, LLC 1301 East Ninth Street, Suite 1005 1301 East Ninth Street, Suite 1005 Cleveland, Ohio 44114 Cleveland, Ohio 44114 BY OVERNIGHT COURIER, SEND TO: ......................................................................... The Berkshire Funds c/o Mutual Shareholder Services, LLC 1301 East Ninth Street, Suite 1005 Cleveland, Ohio 44114 BY TELEPHONE BY TELEPHONE ......................................................................... Telephone transactions may not be You must select this service on used for initial purchases. your account application before making your first telephone trans- action. Thereafter, you may call 1-877-593-8637 to purchase shares in an existing account. Your pur- chase will be effective at the NAV next computed after your instruc- tion is received in proper form by the Transfer Agent. Prospectus 18 TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT - - -------------------------------------------------------------------------- BY WIRE BY WIRE .............................................................................. Call 1-877-593-8637 for instruc- Send your investment to Firstar Bank, tions and to obtain an investor N.A. by following the instructions account number or an IRA account listed in the column to the left. number prior to wiring the funds. Send your investment to Firstar Bank N.A. with these instructions: * Firstar Bank, N.A. * ABA#: 0420-0001-3 * For Credit to The Berkshire Funds * DDA#: 821602976 * For further credit to: Name of fund to be purchased Your shareholder account number Your shareholder account name TELEPHONE AND WIRE TRANSACTIONS Only bank accounts held at domestic financial institutions that are Automated Clearing House (ACH) members can be used for telephone purchase transactions. With respect to all transactions made by telephone, the Funds and their Transfer Agent will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. Such procedures may include, among others, requiring some form of personal identification prior to acting upon telephone instructions, providing written confirmation of all such transactions, and/or tape recording all telephone instructions. If reasonable procedures are followed, then neither the Funds nor the Transfer Agent will be liable for any loss, cost, or expense for acting upon an investor's telephone instructions or for any unauthorized telephone redemption. In any instance where the Funds' Transfer Agent is not reasonably satisfied that instructions received by telephone are genuine, neither the Funds nor the Transfer Agent shall be liable for any losses which may occur because of delay in implementing a transaction. Prospectus 19 If you purchase your initial shares by wire, the Transfer Agent first must have received a completed account application and issued an account number to you. The account number and Fund name must be included in the wiring instructions as set forth on the previous page. The Transfer Agent must receive your account application to establish shareholder privileges and to verify your account information. Payment of redemption proceeds may be delayed and taxes may be withheld unless the Funds receive a properly completed and executed account application. Shares purchased by wire will be purchased at the NAV next determined after the Transfer Agent receives your wired funds and all required information is provided in the wire instructions. If the Transfer Agent is notified no later than 3:00 p.m. Eastern time of the wire instructions, and the wired funds are received by the Transfer Agent no later than 5:00 p.m. Eastern time, then the shares purchased will be priced at the NAV determined on that business day. If the wire is not received by 5:00 p.m. Eastern time, the purchase will be effective at the NAV next calculated after receipt of the wire. TAX-DEFERRED PLANS If you are eligible, you may set up one or more tax-deferred accounts. A tax-deferred account allows you to shelter your investment income and capital gains from current income taxes. A contribution to certain of these plans may also be tax deductible. Tax-deferred accounts include retirement plans described on the following page and the Education IRA. Distributions from these plans are generally subject to an additional tax if withdrawn prior to age 59 1/2 or used for a nonqualifying purpose. Investors should consult their tax adviser or legal counsel before selecting a tax-deferred account. Complete instructions about how to establish and maintain your tax-deferred retirement plan will be included in the retirement plan kit you receive in the mail. Firstar Bank, N.A., serves as the custodian for the tax-deferred accounts offered by the Funds. You will be charged an annual account maintenance fee of $10 for each tax-deferred account you have with either Fund. You may pay the fee by check or have it automatically deducted from your account (usually in December). The custodian reserves the right to change the amount of the fee or to waive it in whole or part for certain types of accounts. Prospectus 20 TYPES OF TAX-DEFERRED ACCOUNTS * Traditional IRA An individual retirement account. Your contribution may or may not be deductible depending on your circumstances. Assets can grow tax-free and distributions are taxable as income. * Roth IRA An IRA with non-deductible contributions, tax-free growth of assets, and tax-free distributions for qualified distributions. * Spousal IRA An IRA funded by a working spouse in the name of a non-earning spouse. * Education IRA This plan allows individuals, subject to certain income limitations, to contribute up to $500 annually on behalf of any child under the age of eighteen. * SEP-IRA An individual retirement account funded by employer contributions. Your assets grow tax-free and distributions are taxable as income. * Keogh or Profit Sharing Plans These plans allow corporations, partnerships and individuals who are self-employed to make tax-deductible contributions of up to $30,000 for each person covered by the plans. * 403(b) Plans An arrangement that allows employers of charitable or educational organizations to make voluntary salary reduction contributions to a tax- deferred account. * 401(k) Plans Allows employees of corporations of all sizes to contribute a percentage of their wages on a tax-deferred basis. These accounts need to be established by the trustee of the plan. Prospectus 21 AUTOMATIC INVESTMENT PLANS By completing the Automatic Investment Plan section of the account application, you may make automatic monthly or quarterly investments ($100 minimum per purchase) in either Fund from your bank or savings account. Your initial investment minimum is $2,500 if you select this option. Shares of either Fund may also be purchased through direct deposit plans offered by certain employers and government agencies. These plans enable shareholders to have all or a portion of their payroll or Social Security checks transferred automatically to purchase Fund shares. FOR INVESTING - - --------------------------------------------------------------------------- AUTOMATIC INVESTMENT PLAN PAYROLL DIRECT DEPOSIT PLAN ........................................................................... For making automatic investments For making automatic investments from from a designated bank account. your payroll check. DIVIDEND REINVESTMENT: ........................................................................... All income dividends and capital gains dis- tributions will be automatically reinvested in shares of the Funds unless you indicate otherwise on the account application or in writing. INSTRUCTIONS FOR SELLING FUND SHARES You may sell all or part of your shares on any day that the New York Stock Exchange is open for trading. Your shares will be sold at the next NAV per share calculated after your order is received in proper form by the Transfer Agent. The proceeds of your sale may be more or less than the purchase price of your shares, depending on the market value of the Fund's securities at the time of your sale. Your order will be processed promptly and you will generally receive the proceeds within seven days after receiving your properly completed request. The Funds will not mail any proceeds unless your investment check has cleared the bank, which may take up to fifteen calendar days. This procedure is intended to protect each Fund and its shareholders from loss. If the dollar or share amount requested is greater than the current value of your account, your entire account balance will be redeemed. If you choose to redeem your account in full, any automatic services currently in effect for the account will be terminated unless you indicate otherwise in writing. Prospectus 22 TO SELL SHARES - - -------------------------------------------------------------------------- By Mail .......................................................................... Write a letter of instruction that includes: * The names(s) and signature(s) of all account owners. * Your account number. * The name of the Fund. * The dollar or share amount you want to sell. * Where to send the proceeds. * If redeeming from your IRA, please note applicable withholding requirements. * Obtain a signature guarantee or other documentation, if required. MAIL YOUR REQUEST TO: BY OVERNIGHT COURIER, SEND TO: ......................................................................... The Berkshire Funds The Berkshire Funds c/o Mutual Shareholder Services, LLC c/o Mutual Shareholder Services, LLC 1301 East Ninth Street, Suite 1005 1301 East Ninth Street, Suite 1005 Cleveland, Ohio 44114 Cleveland, Ohio 44114 BY TELEPHONE ......................................................................... * You will automatically be granted * You will not be able to redeem by telephone redemption priviledges telephone and have a check sent to unless you decline them in writing your address of record for a period or indicate on the appropriate sec- of 15 days following an address tion of the account application that change. you decline this option. Otherwise, you may redeem Fund shares by * Unless you decline telephone calling 1-877-593-8637. Redemption privileges in writing or on your proceeds will only be mailed to your account applcation, as long as the address of record. Funds take reasonable measures to verify the order, you may be * You may redeem a maximum of responsible for any fraudulent $50,000 per day by telephone. telephone order. For specific information on how to redeem your account, and to determine if a signature guarantee or other documentation is required, please call toll-free in the U.S. 1-877-593-8637. Prospectus 23 ADDITIONAL REDEMPTION INFORMATION SIGNATURE GUARANTEES Signature guarantees are designed to protect both you and the Funds from fraud. A signature guarantee of each owner is required to redeem shares in the following situations: * If you change ownership on your account. * If you request the redemption proceeds to be sent to a different address than that registered on the account. * If the proceeds are to be made payable to someone other than the account's owner(s). * If a change of address request has been received by the Transfer Agent within the last 15 days. * If you wish to redeem $50,000 or more from any shareholder account. Signature guarantees can be obtained from most banks, savings and loan associations, trust companies, credit unions, broker/dealers, and member firms of a national securities exchange. Call your financial institution to see if they have the ability to guarantee a signature. A notary public cannot provide signature guarantees. The Funds reserve the right to require a signature guarantee under other circumstances or to delay a redemption when permitted by Federal Law. For more information pertaining to signature guarantees, please call 1-877-593-8637. CORPORATE, TRUST AND OTHER ACCOUNTS Redemption requests from corporate, trust, and other accounts may require documents in addition to those described above, evidencing the authority of the officers, trustees or others. In order to avoid delays in processing redemption requests for these accounts, you should call the Transfer Agent at 1-877-593-8637 to determine what additional documents are required. [Side panel: What is a redemption? A redemption is a sale by you to the Fund of some or all of your shares. The price per share you receive when you redeem Fund shares may be more or less than the price at which you purchased those shares. When you redeem your shares, you will generally have a gain or loss, depending upon whether the amount you receive for your shares is more or less than your cost or other basis in the shares.] [Side panel: Redemption in kind: The Funds intend to make payments for all redemptions in cash. However, if a Fund believes that conditions exist which make cash payments detrimental to the best interests of the Fund, payment for shares redeemed may be made in whole or in part through a distribution of portfolio securities chosen by the Adviser (under the supervision of the Board of Trustees). If payment is made in securities, shareholders may incur transaction costs in converting these securities into cash after they have redeemed their shares.] Prospectus 24 ADDRESS CHANGES To change the address on your account, call the Transfer Agent at 1-877-593-8637 and send a written request signed by all account owners. Include the name of the Fund(s), account number(s), name(s) on the account and both the old and new addresses. Certain options may be suspended for a period of 15 days following an address change. TRANSFER OF OWNERSHIP In order to change the account registration or transfer ownership of an account, additional documents will be required. In order to avoid delays in processing these requests, you should call the Transfer Agent at 1-877-593-8637 to determine what additional documents are required. REDEMPTION INITIATED BY THE FUNDS Because there are certain fixed costs involved with maintaining your account, a Fund may require you to redeem all of your shares if your account balance falls below $2,500. After your account balance falls below the minimum balance, you will receive a notification from the Fund indicating its intent to close your account along with instructions on how to increase the value of your account to the minimum amount within 60 days. If your account balance is still below $2,500 after 60 days, the Fund may close your account and send you the proceeds. This minimum balance requirement does not apply to IRAs and other tax-sheltered investment accounts. The right of redemption by a Fund will not apply if the value of your account balance falls below $2,500 because of market performance. Each Fund reserves the right to close an account if the shareholder is deemed to engage in activities which are illegal or otherwise believed to be detrimental to the Fund. Prospectus 25 HOW TO EXCHANGE SHARES You may exchange all or a portion of your investment from one Berkshire Fund to another. Any new account established through an exchange will have the same privileges as your original account and will also be subject to the minimum investment requirements described on Page 16 of this Prospectus. Aside from this requirement, there is a $500 minimum for exchanging shares under the program. There is currently no fee for an exchange. Exchanges will be executed on the basis of the relative NAV of the shares exchanged. An exchange is considered to be a sale of shares for federal income tax purposes on which you may realize a taxable gain or loss. SHAREHOLDER COMMUNICATIONS ACCOUNT STATEMENTS. Every quarter, shareholders of each Fund will automatically receive regular account statements. You will also be sent a yearly statement detailing the tax characteristics of any dividends and distributions you have received. CONFIRMATIONS. Confirmation statements will be sent after each transaction that affects your account balance or account registration. REGULATORY MAILINGS. Financial reports will be sent at least semiannually. Annual reports will include audited financial statements. To reduce expenses, one copy of each report will be mailed to each taxpayer identification number even though the investor may have more than one account in the Funds. DIVIDENDS AND DISTRIBUTIONS Each Fund intends to pay distributions on an annual basis and expects that distributions will consist primarily of capital gains. You may elect to reinvest income dividends and capital gain distributions in the form of additional shares of the Fund or receive [Side panel: What is a distribution? As a shareholder, you are entitled to your share of the Fund's income from interest and dividends, and gains from the sale of investments. You receive such earnings as either an income dividend or a capital gains distribution. Income dividends come from both the dividends that the Fund earns from its holdings and interest it receives from its money market and bond investments. Capital gains are realized when the Fund sells securities for higher prices than it paid for them. The capital gains are either short-term or long-term depending on whether the Fund held the securities for less than or more than one year.] [Side panel: When a fund makes a distribution to its shareholders, the share price of the Fund drops by the amount of the distribution, net of any market fluctuations.] Prospectus 26 these distributions in cash. Dividends and distributions from each Fund are automatically reinvested in the Fund, unless you elect to have dividends paid in cash. Reinvested dividends and distributions receive the same tax treatment as those paid in cash. If you are interested in changing your election, you may send written notification to the Transfer Agent or call 1-877-593-8637. TAXES Fund dividends and distributions are taxable to most investors (unless your investment is in an IRA or other tax-advantaged account). Dividends paid by a Fund out of net ordinary income and distributions of net short-term capital gains are generally taxable to the shareholders as ordinary income. Distributions by a Fund of net long-term capital gains to shareholders are generally taxable to the shareholders at the applicable long-term capital gains rate, regardless of how long the shareholder has held shares of the Fund. Shareholders that sell, exchange or redeem shares generally will have a capital gain or loss from the sale, redemption or exchange. The amount of the gain or loss and the rate of tax will depend mainly upon the amount paid for the shares, the amount received from the sale, exchange, or redemption, and how long the shares were held. The Funds' distributions may be subject to federal income tax whether received in cash or reinvested in additional shares. In addition to federal taxes, you may be subject to state and local taxes on distributions. Additional tax information may be found in the Statement of Additional Information ("SAI"). Because everyone's tax situation is unique, always consult your tax professional about federal, state, and local tax consequences of an investment in either Fund. [Side panel: "Buying a Dividend" If you purchase shares of a Fund just before it makes a distribution, you will pay the full price for the shares and then receive a portion back in the form of a taxable distribution. This is referred to as "buying a dividend." In order to avoid paying unnecessary taxes as a result of a distribution, check the Fund's distribution schedule before you invest.] Prospectus 27 FINANCIAL HIGHLIGHTS The financial highlights table is intended to help you understand the Focus Fund's financial performance since inception. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate you would have earned (or lost) on an investment in the Focus Fund (assuming reinvestment of all dividends and distributions). This information has been audited by McCurdy & Associates CPA's, Inc., the Trust's independent accountants, whose report, along with the Fund's financial statements, are included in the SAI, which is available upon request. Financial highlights for the Technology Fund are not presented because the Fund did not commence operations until December 29, 1999. Berkshire Focus Fund (for the period ended December 31, 1998) - - ---------------------------------------------------------------------------- Per Share Data for a Share Outstanding Throughout Each Period Year Period (a) Ended Ended 12/31/98 12/31/97 -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD: $ 8.64 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income .................... .03 .10 Net realized and unrealized gains (losses) on investments .......... 8.97 (1.36) ---- ----- Total from investment operations ............. 9.00 8.74 DISTRIBUTIONS: Dividends (from net investment income) ... (.02) (.10) Distributions (from capital gains) ....... (1.18) 0 ----- ----- Total distributions .......................... (1.20) (.10) ----- ----- NET ASSET VALUE, END OF PERIOD: $ 16.44 $ 8.64 ===== ==== TOTAL RETURN - Note (6) ...................... 104.17% (12.60%)(b) SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period .................... $ 352,988 $ 101,412 Ratio of expenses to average net assets(c) .................. 1.93% 1.00%(b) Ratio of expenses to average net assets(d) .................. 0% 0% Ratio of net investment income to average net assets(c) .................. (1.66%) 0.12%(b) Ratio of net investment income to average net assets(d) .................. 0.26% 1.12%(b) Portfolio turnover rate .................. 136% 13%(b) (a) Represents the period from the commencement of operations (July 1, 1997) to December 31, 1997. (b) Not annualized. (c) Before fee waiver. (d) After fee waiver. Prospectus 28 THE BERKSHIRE FUNDS THE BERKSHIRE FOCUS FUND THE BERKSHIRE TECHNOLOGY FUND - - ----------------------------- BOARD OF TRUSTEES Malcolm R. Fobes III, Chairman Ronald G. Seger Leland F. Smith Andrew W. Broer INVESTMENT ADVISER AND ADMINISTRATOR Berkshire Capital Holdings, Inc. LEGAL COUNSEL Brown, Cummins & Brown Co., L.P.A. INDEPENDENT AUDITOR McCurdy & Associates CPA's Inc. TRANSFER AND DIVIDEND DISBURSING AGENT Mutual Shareholder Services, LLC CUSTODIAN Firstar Bank, N.A. Prospectus 29 [Back cover page] BERKSHIRE FOCUS FUND BERKSHIRE TECHNOLOGY FUND - - ----------------------------- WHERE TO GO FOR INFORMATION - - --------------------------- For shareholder inquiries, please call toll-free in the U.S. at 1-877-526-0707. You will find more information about the Berkshire Focus Fund and the Berkshire Technology Fund in the following documents: ANNUAL AND SEMIANNUAL REPORTS - - ----------------------------- Our annual and semiannual reports list the holdings of each Fund, describe Fund performance, include financial statements for the Fund, and discuss the market conditions and strategies that significantly affected the Fund's performance STATEMENT OF ADDITIONAL INFORMATION - - ----------------------------------- The Statement of Additional Information contains additional and more detailed information about each Fund, and is considered to be a part of this Prospectus. THERE ARE THREE WAYS TO GET A COPY OF THESE DOCUMENTS - - ----------------------------------------------------- 1. Call or write for one, and a copy will be sent without charge. The Berkshire Funds 475 Milan Drive, Suite #103 San Jose, CA 95134 1-877-526-0707 www.berkshirefunds.com 2. Call or write the Public Reference Section of the Securities and Exchange Commission ("SEC") and ask them to mail you a copy. The SEC charges a fee for this service. You can also review and copy information about the Funds in person at the SEC Public Reference Room in Washington D.C. Public Reference Section of the SEC Washington D.C. 20549-0102 1-202-942-8090 Copies of these documents may also be obtained, after paying a duplication fee, by electronic request at the following e-mail address: publicinfo@sec.gov 3. Go to the SEC's website (www.sec.gov) and download a text-only version. THE BERKSHIRE FUNDS SEC file number 811-08043 - - -------------------------------------------------- Prospectus 30 PART B THE BERKSHIRE FUNDS Berkshire Focus Fund Berkshire Technology Fund 475 Milan Drive, Suite #103 San Jose, California 95134-2453 (877) 526-0707 STATEMENT OF ADDITIONAL INFORMATION DECEMBER 29, 1999 This Statement of Additional Information ("SAI") is not a Prospectus, but is to be read in conjunction with the Prospectus for the Berkshire Focus Fund and the Berkshire Technology Fund dated December 29, 1999 (the "Prospectus"). This SAI incorporates by reference the Trust's Annual Report to Shareholders for the fiscal year ended December 31, 1998 ("Annual Report"). To obtain a free copy of the Prospectus or Annual Report, please write or call the Fund at the address or phone number referenced above. TABLE OF CONTENTS THE FUNDS....................................................................1 CAPITAL STRUCTURE............................................................1 CONCENTRATION AND NON-DIVERSIFICATION POLICY.................................1 TAX STATUS...................................................................2 INVESTMENT RESTRICTIONS......................................................2 OTHER INVESTMENTS............................................................5 INVESTMENT ADVISER...........................................................9 ADVISORY AND ADMINISTRATION AGREEMENTS.......................................9 MANAGEMENT OF THE FUNDS.....................................................10 REMUNERATION OF OFFICERS AND TRUSTEES.......................................11 PRINCIPAL SECURITY HOLDERS..................................................11 REDEMPTION OF SHARES........................................................12 PURCHASES AND SALES THROUGH BROKER DEALERS..................................12 PERFORMANCE INFORMATION.....................................................12 PORTFOLIO TRANSACTIONS AND BROKERAGE........................................14 CUSTODIAN...................................................................15 TRANSFER AGENT..............................................................15 AUDITORS....................................................................16 FINANCIAL STATEMENTS........................................................16 - i - THE FUNDS The Berkshire Focus Fund (until February 9, 1999, known as Berkshire Capital Growth & Value Fund) and the Berkshire Technology Fund (the "Funds"), are open-end, non-diversified series of The Berkshire Funds (until February 9, 1999, known as the Berkshire Capital Investment Trust) (the "Trust"). The Trust was organized on November 25, 1996 as a Delaware business trust and is authorized to issue an indefinite number of shares of beneficial interest. The Berkshire Focus Fund was organized on November 25, 1996 and the Berkshire Technology Fund was organized on November 5, 1999. The Board of Trustees of the Trust is responsible for managing the business affairs of the Funds. CAPITAL STRUCTURE At present the Funds are the only series authorized by the Trust. The Board of Trustees may authorize the creation of additional series without shareholder approval. All shares, when issued, will be fully paid and non-assessable and will be redeemable and freely transferable. All shares have equal voting rights and can be issued as full or fractional shares. A fractional share has pro rata the same kind of rights and privileges as a full share. The shares possess no preemptive or conversion rights. Each shareholder has one vote for each share held irrespective of the relative net asset value of the shares. Each share has equal dividend, distribution and liquidation rights. The voting rights of the shareholders are non-cumulative, so that holders of more than 50% of the shares can elect all trustees being elected. On some issues, such as election of trustees, all shares of the Funds vote together as one series. On issues affecting only a particular Fund, the shares of the affected Fund will vote as a separate series. An example of such an issue would be a fundamental investment restriction pertaining to only one Fund. CONCENTRATION AND NON-DIVERSIFICATION POLICY CONCENTRATION: Each Fund will concentrate its investments in the equity securities of companies in the technology industry. Concentration requires a Fund to invest 25% or more of the value of its total assets in securities of issuers in a particular industry. Companies in the technology industry shall include businesses which are principally engaged in the development, production, or distribution of products or services related to the following business segments: office and business equipment; computer hardware and software; peripherals; mass storage devices; semiconductors; data networking and telecommunications equipment; and Internet-related products and services. In some future period or periods, due to adverse economic conditions in the technology industry, a Fund may temporarily have less than 25% of the value of its assets invested in that industry. At such times the Adviser may adopt a temporary defensive posture and recommend a Fund invest in money market instruments or U.S. Government obligations. As a result of such concentration in the technology industry, each Fund's shares may fluctuate more widely than the value of shares of a portfolio which invests in a broader range of industries. NON-DIVERSIFICATION: Each Fund is classified as being non-diversified which means that it has the ability to take larger positions in a smaller number of securities than a diversified fund. Each Fund, therefore, may be more susceptible to risk of loss than a more widely diversified fund as a result of a single economic, political, or regulatory occurrence. The policy of each Fund is one of selective investments rather than broad diversification. Each Fund seeks only enough diversification for adequate representation among what it considers to be the best performing securities and to maintain its federal non-taxable status under Subchapter M of the Internal Revenue Code. - 1 - TAX STATUS Under the provisions of Subchapter M of the Internal Revenue Code of 1986 as amended, each Fund intends to pay out substantially all of its investment income and realized capital gains. As a result, the Funds intend to be relieved of federal income tax on the amounts distributed to shareholders. Distributions of any net long-term capital gains realized by each Fund will be taxable to the shareholder as long-term capital gains regardless of the length of time Fund shares have been held by the investor. All income realized by each Fund, including short-term capital gains, will be taxable to the shareholder as ordinary income. Dividends from net income of a Fund will be made annually or more frequently at the discretion of the Board of Trustees and will automatically be reinvested in additional Fund shares at net asset value, unless the shareholder has elected to receive payment in the form of cash. Dividends received shortly after purchase of shares by an investor will have the effect of reducing the per share net asset value of the shares by the amount of such dividends or distributions and, although in effect a return of capital, are subject to federal income taxes. Each Fund is required by federal law to withhold 31% of reportable payments (which may include dividends, capital gains, distributions and redemptions) paid to shareholders who have not complied with IRS regulations. In order to avoid this withholding requirement you must certify on the Account Applications supplied by the Fund, that your Social Security or Taxpayer Identification Number is correct and that you are not currently subject to back-up withholding or otherwise certify that you are exempt from back-up withholding. INVESTMENT RESTRICTIONS Berkshire Focus Fund The Berkshire Focus Fund has adopted the following fundamental investment restrictions. These restrictions cannot be changed without approval by the holders of a majority of the outstanding voting securities of the Fund. As defined in the Investment Company Act of 1940 (the "Act"), the "vote of a majority of the outstanding voting securities" means the lesser of the vote of (i) 67% of the shares of the Fund at a meeting where more than 50% of the outstanding shares are present in person or by proxy or (ii) more than 50% of the outstanding shares of the Fund. The Fund may not: (a) Act as underwriter for securities of other issuers except insofar as the Fund may be deemed an underwriter in selling its own portfolio securities. (b) Borrow money or purchase securities on margin except for temporary or emergency (not leveraging) purposes, including the meeting of redemption requests that might otherwise require the untimely disposition of securities, in an aggregate amount not exceeding 25% of the value of the Fund's total assets at the time any borrowing is made. While the Fund's borrowings are in excess of 5% of its total assets, the Fund will not purchase any additional portfolio securities. (c) Sell securities short. (d) Invest in securities of other investment companies except as part of a merger, consolidation, or purchase of assets approved by the Fund's shareholders or by purchases with no more than 10% of the Fund's assets in the open market involving only customary broker's commissions. (e) Make investments in commodities, commodity contracts or real estate although the Fund may purchase and sell securities of companies which deal in real estate or interests therein. (f) Make loans. The purchase of a portion of a readily marketable issue of publicly distributed bonds, debentures or other debt securities will not be considered the making of a loan. - 2 - (g) Acquire more than 10% of the securities of any class of another issuer, treating all preferred securities of an issuer as a single class and all debt securities as a single class, or acquire more than 10% of the voting securities of another issuer. (h) Invest in companies for the purpose of acquiring control. (i) Purchase or retain securities of any issuer if those officers, directors or trustees of the Fund or its Investment Adviser individually owns more than 1/2 of 1% of any class of security or collectively own more than 5% of such class of securities of such issuer. (j) Pledge, mortgage or hypothecate any of its assets. (k) Invest in securities which may be subject to registration under the Securities Act of 1933 prior to sale to the public or which are not at the time of purchase readily saleable. (l) Invest more than 10% of the total Fund assets, taken at market value at the time of purchase, in securities of companies with less than three years' continuous operation, including the operations of any predecessor. (m) Issue senior securities. (n) Acquire any securities of companies within one industry if, as a result of such acquisition, more than 25% of the value of the Fund's total assets would be invested in securities of companies within such industry; provided, however, that there shall be no limitation on the purchase of securities of companies in the electronic technology industry. With respect to fundamental restriction (n) above, companies in the electronic technology industry shall be defined as businesses which are principally engaged in the development, production, or distribution of products or services related to the following business segments: Computers, Computer Peripherals, Semiconductors, Software, Telecommunications and Mass Storage Devices. Berkshire Technology Fund The Berkshire Technology Fund has adopted the following fundamental investment restrictions. These restrictions cannot be changed without approval by the holders of a majority of the outstanding voting securities of the Fund. As defined in the Investment Company Act of 1940 (the "Act"), the "vote of a majority of the outstanding voting securities" means the lesser of the vote of (i) 67% of the shares of the Fund at a meeting where more than 50% of the outstanding shares are present in person or by proxy or (ii) more than 50% of the outstanding shares of the Fund. Other investment practices which may be changed by the Board of Trustees without the approval of shareholders to the extent permitted by applicable law, regulation or regulatory policy are considered non-fundamental ("Non-Fundamental"). 1. Borrowing Money. The Fund will not borrow money, except (a) from a bank, provided that immediately after such borrowing there is an asset coverage of 300% for all borrowings of the Fund; or (b) from a bank or other persons for temporary purposes only, provided that such temporary borrowings are in an amount not exceeding 5% of the Fund's total assets at the time when the borrowing is made. This limitation does not preclude the Fund from entering into reverse repurchase transactions, provided that the Fund has an asset coverage of 300% for all borrowings and repurchase commitments of the Fund pursuant to reverse repurchase transactions. - 3 - 2. Senior Securities. The Fund will not issue senior securities. This limitation is not applicable to activities that may be deemed to involve the issuance or sale of a senior security by the Fund, provided that the Fund's engagement in such activities is consistent with or permitted by the Investment Company Act of 1940, as amended, the rules and regulations promulgated thereunder or interpretations of the Securities and Exchange Commission or its staff. 3. Underwriting. The Fund will not act as underwriter of securities issued by other persons. This limitation is not applicable to the extent that, in connection with the disposition of portfolio securities (including restricted securities), the Fund may be deemed an underwriter under certain federal securities laws. 4. Real Estate. The Fund will not purchase or sell real estate. This limitation is not applicable to investments in marketable securities which are secured by or represent interests in real estate. This limitation does not preclude the Fund from investing in mortgage-related securities or investing in companies engaged in the real estate business or that have a significant portion of their assets in real estate (including real estate investment trusts). 5. Commodities. The Fund will not purchase or sell commodities unless acquired as a result of ownership of securities or other investments. This limitation does not preclude the Fund from purchasing or selling options or futures contracts, from investing in securities or other instruments backed by commodities or from investing in companies which are engaged in a commodities business or have a significant portion of their assets in commodities. 6. Loans. The Fund will not make loans to other persons, except (a) by loaning portfolio securities, (b) by engaging in repurchase agreements, or (c) by purchasing nonpublicly offered debt securities. For purposes of this limitation, the term "loans" shall not include the purchase of a portion of an issue of publicly distributed bonds, debentures or other securities. 7. Concentration. The Fund will not invest 25% or more of its total assets in a particular industry other than the technology industry. This limitation is not applicable to investments in obligations issued or guaranteed by the U.S. government, its agencies and instrumentalities or repurchase agreements with respect thereto. With respect to the percentages adopted by the Trust as maximum limitations on the Berkshire Technology Fund's investment policies and limitations, an excess above the fixed percentage will not be a violation of the policy or limitation unless the excess results immediately and directly from the acquisition of any security or the action taken. This paragraph does not apply to the borrowing policy set forth in paragraph 1 above. Notwithstanding any of the foregoing limitations, any investment company, whether organized as a trust, association or corporation, or a personal holding company, may be merged or consolidated with or acquired by the Berkshire Technology Fund, provided that if such merger, consolidation or acquisition results in an investment in the securities of any issuer prohibited by said paragraphs, the Fund shall, within ninety days after the consummation of such merger, consolidation or acquisition, dispose of all of the securities of such issuer so acquired or such portion thereof as shall bring the total investment therein within the limitations imposed by said paragraphs above as of the date of consummation. Non-Fundamental. The following limitations have been adopted by the Trust with respect to the Berkshire Technology Fund and are Non-Fundamental (see "Fundamental" above). - 4 - a. Pledging. The Fund will not mortgage, pledge, hypothecate or in any manner transfer, as security for indebtedness, any assets of the Fund except as may be necessary in connection with borrowings described above. Margin deposits, security interests, liens and collateral arrangements with respect to transactions involving options, futures contracts, short sales and other permitted investments and techniques are not deemed to be a mortgage, pledge or hypothecation of assets for purposes of this limitation. b. Borrowing. The Fund will generally borrow only for liquidity purposes. The Fund will not purchase any security while borrowings (including reverse repurchase agreements) representing more than 5% of its total assets are outstanding. The Fund will not invest more then 5% of its net assets in reverse repurchase agreements. c. Margin Purchases. The Fund will not purchase securities or evidences of interest thereon on "margin." This limitation is not applicable to short term credit obtained by the Fund for the clearance of purchases and sales or redemption of securities, or to arrangements with respect to transactions involving options, futures contracts, short sales and other permitted investments and techniques. d. Illiquid Investments. The Fund may invest up to 15% of its net assets in securities for which there are legal or contractual restrictions on resale and other illiquid securities. OTHER INVESTMENTS: In connection with its investment objective and policies each Fund (except as otherwise indicated) may invest in the following types of securities which can involve certain risks: U.S. GOVERNMENT OBLIGATIONS: Each Fund may purchase obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities. Such securities will typically include, without limitation, U.S. Treasury securities such as Treasury Bills, Treasury Notes or Treasury Bonds that differ in their interest rates, maturities and times of issuance. U.S. government obligations may be backed by the credit of the government as a whole or only by the issuing agency. U.S. Treasury bonds, notes, and bills and some agency securities, such as those issued by the Federal Housing Administration and the Government National Mortgage Association (GNMA), are backed by the full faith and credit of the U.S. government as to payment of principal and interest and are the highest quality government securities. Other securities issued by U.S. government agencies or instrumentalities, such as securities issued by the Federal Home Loan Banks and the Federal Home Loan Mortgage Corporation, are supported only by the credit of the agency that issued them, and not by the U.S. government. Securities issued by the Federal Farm Credit System, the Federal Land Banks, and the Federal National Mortgage Association (FNMA) are supported by the agency's right to borrow money from the U.S. Treasury under certain circumstances, but are not backed by the full faith and credit of the U.S. government. WARRANTS: Each Fund may purchase warrants, valued at the lower of cost or market, but only to the extent that such purchase does not exceed 5% of the Fund's net assets at the time of purchase. Included within that amount, but not to exceed 2% of the Fund's net assets, may be warrants which are not listed on the New York or American Stock Exchanges. - 5 - FOREIGN INVESTMENTS. Subject to the limitations described in the prospectus, each Fund may invest in foreign securities. Foreign investments can involve significant risks in addition to the risks inherent in U.S. investments. The value of securities denominated in or indexed to foreign currencies, and of dividends and interest from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets, and prices on some foreign markets can be highly volatile. Many foreign countries lack uniform accounting and disclosure standards comparable to those applicable to U.S. companies, and it may be more difficult to obtain reliable information regarding an issuer's financial condition and operations. In addition, the costs of foreign investing, including withholding taxes, brokerage commissions, and custodial costs, generally are higher than for U.S. investments. Foreign markets may offer less protection to investors than U.S. markets. Foreign issuers, brokers, and securities markets may be subject to less government supervision. Foreign security trading practices, including those involving the release of assets in advance of payment, may invoke increased risks in the event of a failed trade or the insolvency of a broker-dealer, and may involve substantial delays. It also may be difficult to enforce legal rights in foreign countries. Investing abroad also involves different political and economic risks. Foreign investments may be affected by actions of foreign governments adverse to the interests of U.S. investors, including the possibility of expropriation or nationalization of assets, confiscatory taxation, restrictions on U.S. investment or on the ability to repatriate assets or convert currency into U.S. dollars, or other government intervention. There may be a greater possibility of default by foreign governments or foreign government-sponsored enterprises. Investments in foreign countries also involve a risk of local political, economic or social instability, military action or unrest, or adverse diplomatic developments. There is no assurance that the Adviser will be able to anticipate or counter these potential events and their impacts on a Fund's share price. American Depository Receipts and European Depository Receipts ("ADRs" and "EDRs") are certificates evidencing ownership of shares of a foreign-based issuer held in trust by a bank or similar financial institution. Designed for use in U.S. and European securities markets, respectively, ADRs and EDRs are alternatives to the purchase of the underlying securities in their national market and currencies. OPTION TRANSACTIONS. Each Fund may engage in option transactions involving individual securities and market indexes. An option involves either (a) the right or the obligation to buy or sell a specific instrument at a specific price until the expiration date of the option, or (b) the right to receive payments or the obligation to make payments representing the difference between the closing price of a market index and the exercise price of the option expressed in dollars times a specified multiple until the expiration date of the option. Options are sold (written) on securities and market indexes. The purchaser of an option on a security pays the seller (the writer) a premium for the right granted but is not obligated to buy or sell the underlying security. The purchaser of an option on a market index pays the seller a premium for the right granted, and in return the seller of such an option is obligated to make the payment. A writer of an option may terminate the obligation prior to expiration of the option by making an offsetting purchase of an identical option. Options are traded on organized exchanges and in the over-the-counter market. Call options on securities which a Fund sells (writes) will be covered or secured, which means that it will own the underlying security in the case of a call option; will segregate with the Custodian high quality liquid debt obligations equal to the option exercise price in the case of a put option; or for an option on a stock index, will hold a portfolio of securities substantially replicating the movement of the index (or, to the extent it does not hold such a portfolio, will maintain a segregated account with the Custodian of high quality liquid debt obligations equal to the market value of the option, marked to market daily). When a Fund writes options, it may be required to maintain a margin account, to pledge the underlying securities or U.S. government obligations or to deposit assets in escrow with the Custodian. - 6 - The purchase and writing of options involves certain risks. The purchase of options limits a Fund's potential loss to the amount of the premium paid and can afford the Fund the opportunity to profit from favorable movements in the price of an underlying security to a greater extent than if transactions were effected in the security directly. However, the purchase of an option could result in the Fund losing a greater percentage of its investment than if the transaction were effected directly. When a Fund writes a covered call option, it will receive a premium, but it will give up the opportunity to profit from a price increase in the underlying security above the exercise price as long as its obligation as a writer continues, and it will retain the risk of loss should the price of the security decline. When a Fund writes a put option, it will assume the risk that the price of the underlying security or instrument will fall below the exercise price, in which case the Fund may be required to purchase the security or instrument at a higher price than the market price of the security or instrument. In addition, there can be no assurance that a Fund can effect a closing transaction on a particular option it has written. Further, the total premium paid for any option may be lost if the Fund does not exercise the option or, in the case of over-the-counter options, the writer does not perform its obligations. FIXED INCOME SECURITIES: Fixed income securities include corporate debt securities, U.S. government securities, mortgage-backed securities, zero coupon bonds, asset-backed and receivable-backed securities and participation interests in such securities. Preferred stock and certain common stock equivalents may also be considered to be fixed income securities. Fixed income securities are generally considered to be interest rate sensitive, which means that their value will generally decrease when interest rates rise and increase when interest rates fall. Securities with shorter maturities, while offering lower yields, generally provide greater price stability than longer term securities and are less affected by changes in interest rates. REPURCHASE AGREEMENTS: A repurchase agreement is a short term investment in which the purchaser acquires ownership of a U.S. Government security (which may be of any maturity) and the seller agrees to repurchase the obligation at a future time at a set price, thereby determining the yield during the purchaser's holding period (usually not more than seven days from the date of purchase). Any repurchase transaction in which a Fund engages will require full collateralization of the seller's obligation during the entire term of the repurchase agreement. In the event of a bankruptcy or other default of the seller, a Fund could experience both delays in liquidating the underlying security and losses in value. However, the Funds intend to enter into repurchase agreements only with the Trust's custodian, other banks with assets of $1 billion or more and registered securities dealers determined by the Adviser to be creditworthy. The Adviser monitors the creditworthiness of the banks and securities dealers with which a Fund engages in repurchase transactions, and a Fund will not invest more than 15% of its net assets in illiquid securities, including repurchase agreements maturing in more than seven days. - 7 - WHEN ISSUED SECURITIES AND FORWARD COMMITMENTS: Each Fund may buy and sell securities on a when-issued or delayed delivery basis, with payment and delivery taking place at a future date. The price and interest rate that will be received on the securities are each fixed at the time the buyer enters into the commitment. Each Fund may enter into such forward commitments if it holds, and maintains until the settlement date in a separate account at the Fund's Custodian, cash or U.S. government securities in an amount sufficient to meet the purchase price. Each Fund will not invest more than 25% of its total assets in forward commitments. Forward commitments involve a risk of loss if the value of the security to be purchased declines prior to the settlement date. Any change in value could increase fluctuations in the Fund's share price and yield. Although each Fund will generally enter into forward commitments with the intention of acquiring securities for its portfolio, a Fund may dispose of a commitment prior to the settlement if the Adviser deems it appropriate to do so. SHORT SALES (Berkshire Technology Fund only) The Berkshire Technology Fund may seek to hedge investments through short sales. The Fund may make short sales, which are transactions in which the Fund sells a security it does not own, in anticipation of a decline in the market value of that security. Securities which the Fund may sell short would be those whose values are linked to various indexes. Examples of these linked securities are Standard & Poor's Depository Receipts, Diamonds Trust, NASDAQ 100 Trust and Merrill Lynch HOLDRs Trust. To complete a short sale, the Fund must borrow the security to make delivery to the buyer. The Fund then is obligated to replace the security borrowed by purchasing it at the market price at or prior to the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. Until the security is replaced, the Fund is required to repay the lender any dividends or interest that accrue during the period of the loan. To borrow the security, the Fund also may be required to pay a premium, which would increase the cost of the security sold. The net proceeds of the short sale will be retained by the broker, to the extent necessary to meet margin requirements, until the short position is closed out. The Fund also will incur transaction costs in effecting short sales. The Fund will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund will realize a gain if the security declines in price between those dates. The amount of any gain will be decreased, and the amount of any loss increased by the amount of the premium, dividends, interest, or expenses the Fund may be required to pay in connection with a short sale. In connection with its short sales, the Fund will be required to maintain a segregated account with its Custodian of cash or liquid assets equal to the market value of the securities sold less any collateral deposited with its broker (not including the proceeds from the short sale). The Fund will limit its short sales so that no more than 10% of its net assets (less all its liabilities other than obligations under the short sales) will be deposited as collateral and allocated to the segregated account. However, the segregated account and deposits will not necessarily limit the Fund's potential loss on a short sale, which is unlimited. In addition, the Fund may make short sales "against the box," i.e., when a security identical to one owned by the Fund is borrowed and sold short. The Fund may make a short sale when the Fund's investment adviser believes the price of the stock may decline and, for tax or other reasons, the Fund's investment adviser does not want to sell the stock currently. If the Fund enters into a short sale against the box, it is required to segregate securities equivalent in kind and amount to the securities sold short (or securities convertible or exchangeable into such securities) and is required to hold such securities while the short sale is outstanding. The Fund will incur transaction costs in connection with opening, maintaining and closing short sales against the box. The Fund's policy with respect to short sales is non-fundamental, and may be changed by the Board of Trustees without the vote of the Fund's shareholders. - 8 - INVESTMENT ADVISER The Funds retain Berkshire Capital Holdings, Inc., 475 Milan Drive, Suite #103, San Jose, California 95134-2453, as their investment adviser (the "Adviser"). The Adviser is a California corporation founded in February 1993. The company is registered as an investment adviser with the Securities and Exchange Commission under the Investment Advisers Act of 1940. The corporation is controlled and wholly-owned by Malcolm R. Fobes III and Ronald G. Seger. Malcolm R. Fobes III has had the direct responsibility for the overall strategic management of each Fund's portfolio and its administration since the Fund's inception. Mr. Fobes founded Berkshire Capital Holdings, Inc. in 1993, has served as Chairman of the Board and Chief Executive Officer since the company's inception, and has been responsible for the direction of the company's investments in both private and publicly-held concerns. Mr. Fobes has a B.S. degree in Finance and a minor in Economics from San Jose State University in California. In addition to founding the company in 1993, Mr. Fobes was also simultaneously retained by Adobe Systems, Inc., a high-technology software development firm, as a technical support engineer from May 1991 to November 1994. Mr. Fobes has served exclusively in the capacity of Chairman and Chief Executive Officer of the Adviser from November 1994 to present. Ronald G. Seger has served as Secretary and member of the Board of Directors of the Adviser since September 1996. Both Mr. Fobes and Mr. Seger also serve as Trustees of the Funds. ADVISORY AND ADMINISTRATION AGREEMENTS The Trust has a separate, but substantially identical, investment advisory contract (each of which is referred to as an "Advisory Agreement") and a separate, but substantially identical, administration contract (each of which is referred to as an "Administration Agreement") with Berkshire Capital Holdings, Inc. for each Fund. Under each Advisory Agreement, Berkshire Capital Holdings, Inc. will determine what securities will be purchased, retained or sold by the applicable Fund on the basis of a continuous review of its portfolio. Mr. Fobes, will have the direct responsibility of managing the composition of the Fund's portfolio in accordance with the Fund's investment objective. Pursuant to its contract with the Fund, the Adviser must, among other requirements, (i) render research, statistical and advisory services to the Fund, (ii) make specific recommendations based on the Fund's investment requirements, and (iii) pay salaries of the Fund's employees who may be officers, directors or employees of the Adviser. The Adviser has paid the initial organizational costs of each Fund. The Adviser is paid a fee of 1.5% per year on the net assets of each Fund. All fees are computed on the average daily closing net asset value of the Fund and are payable monthly. The Adviser may at its discretion, forego sufficient fees which would have the effect of lowering each Fund's expense ratio and increasing the yield to shareholders. For the period July 1, 1997 (commencement of operations) to December 31, 1997, and the fiscal year ended December 31, 1998, the Adviser voluntarily waived all of its fees for the Berkshire Focus Fund. The Adviser does not intend to waive its fees in 1999. Each Advisory Contract is terminable on 60 days' written notice, without penalty, by a vote of a majority of applicable Fund's outstanding shares or by vote of a majority of the Board of Trustees, or by the Adviser on 60 days' written notice, and automatically terminates in the event of its assignment. Under each Administration Agreement, Berkshire Capital Holdings, Inc. ("Berkshire Capital") renders all administrative and supervisory services to the applicable Fund. Berkshire Capital oversees the maintenance of all books and records with respect to the Fund's securities transactions and the Fund's book of accounts in accordance with all applicable federal and state laws and regulations. Berkshire Capital also arranges for the preservation of journals, ledgers, corporate documents, brokerage account records and other records which are required pursuant to Rule 31a-1 promulgated under the 1940 Act. Berkshire Capital is also responsible for the equipment, staff, office space and facilities necessary to perform its obligations. Each Fund assumes all other expenses except to the extent of those paid by the Adviser. - 9 - Under each Administration Agreement, Berkshire Capital assumes and pays all ordinary expenses of the applicable Fund. Examples of such expenses include: (a) organizational costs, (b) compensation of the Adviser's personnel, (c) compensation of any of the Fund's trustees, officers or employees who are not interested persons of the Investment Adviser or its affiliates, (d) fees and expenses of registering the Fund's shares under the federal securities laws and of qualifying its shares under applicable state Blue Sky laws, including expenses attendant upon renewing such registrations and qualifications, (e) insurance premiums, (f) fidelity bonds, (g) accounting and bookkeeping costs and expenses necessary to maintain the Fund's books and records, (h) outside auditing and ordinary legal expenses, (i) all costs associated with shareholders meetings and the preparation and dissemination of proxy solicitation materials, (j) costs of printing and distribution of the Fund's Prospectus and other shareholder information to existing shareholders, (k) charges, if any, of custodian and dividend disbursing agent's fees, (l) industry association fees, and (m) costs of independent pricing services and calculation of daily net asset value. The Investment Adviser may, at its discretion, assume any additional expenses ordinarily assumed by a Fund when it determines that such action is in the best interest of the shareholders. Any extraordinary and non-recurring expenses shall be paid by the Fund. Pursuant to each Administration Agreement, Berkshire Capital receives a fee which is paid monthly at an annual rate of 0.50% of the applicable Fund's average daily net assets up to $50 million, 0.45% of such assets from $50 million to $200 million, 0.40% of such assets from $200 million to $500 million, 0.35% of such assets from $500 million to $1 billion, and 0.30% of such assets in excess of $1 billion. For the period July 1, 1997 (commencement of operations) to December 31, 1997 and for the fiscal year ended December 31, 1998, Berkshire Capital voluntarily waived all fees due for its services as Administrator to the Berkshire Focus Fund. Berkshire Capital does not intend to waive its fees in 1999. The Adviser may act as an investment adviser and administrator to other persons, firms, or corporations (including investment companies), and may have numerous advisory clients besides the Funds. MANAGEMENT OF THE FUNDS The business of each Fund is managed under the direction of its Board of Trustees in accordance with Section 3.2 of the Declaration of Trust of The Berkshire Funds, which Declaration of Trust has been filed with the Securities and Exchange Commission and is available upon request. Pursuant to Section 2.6 of the Declaration of Trust, the trustees shall elect officers including a president, secretary and treasurer. The Board of Trustees retains the power to conduct, operate and carry on the business of each Fund and has the power to incur and pay any expenses which, in the opinion of the Board of Trustees, are necessary or incidental to carry out any of the Funds' purposes. The trustees, officers, employees and agents of the Trust, when acting in such capacities, shall not be subject to any personal liability except for his or her own bad faith, willful misfeasance, gross negligence or reckless disregard of his or her duties. The trustees and officers, together with their addresses, age, principal occupations during the past five years are as follows: - 10 - Principal Occupation Name and Address Position Past 5 Years ===================== ========= ================================= *Malcolm R. Fobes III Trustee and Berkshire Capital Holdings, Inc.; 475 Milan Drive President, Chairman & CEO Suite #103 Treasurer and San Jose, CA 95134 Chief Financial Age: 35 Officer *Ronald G. Seger Trustee and Ronald G. Seger, O.D.; 1150 W. El Camino Real Secretary Optometrist Mountain View, CA 94040 Age: 49 Leland F. Smith Trustee **Corporate Asset Strategies, Inc.; P.O. Box 3539 Chairman & CEO Sunriver, OR 97707 Elesco, Ltd.; Age: 60 Chairman & CEO Andrew W. Broer Trustee Cisco Systems, Inc.; 325 East Tasman Drive Data Center Manager San Jose, CA 95134 Taligent, Inc.; Age: 34 Software Integration Engineer *Trustees who are considered "interested persons" as defined in Section 2(a)(19) of the Investment Company Act of 1940 by virtue of their affiliation with the Investment Adviser. **Corporate Asset Strategies, Inc. provides consulting services in the field of corporate real estate management. REMUNERATION OF OFFICERS AND TRUSTEES Trustee fees are Trust expenses. The Trust does not intend to pay fees to the Trustees for the fiscal year ended December 31, 1999, but may pay fees in the future. The compensation paid to the Trustees for the first full year of the Trust ended December 31, 1998 is set forth in the following table: =============================================== Total Compensation from Trust (the Trust is not Name in a Fund Complex) =============================================== Malcolm R. Fobes III 0 Ronald G. Seger 0 Leland F. Smith 0 Andrew W. Broer 0 PRINCIPAL SECURITY HOLDERS As of November 30, 1999, the following persons owned of record 5% or more of the shares of the Berkshire Focus Fund: National Investors Services Corp. 55 Water Street, 32nd Floor New York, NY 10041-3299 20.25% Donaldson, Lufkin & Jenrette, P.O. Box 2052 Attn: 14th Floor Jersey City, NJ 14.12% National Financial Services Corp. 200 Liberty Street One World Financial Center New York, NY 10281 9.50% As of November 30, 1999, the Trustees and officers of the Trust owned of record or beneficially .10% of the Berkshire Focus Fund's outstanding shares. - 11 - REDEMPTION OF SHARES Each Fund has made an election under Rule 18f-1 whereby the Fund may pay for shares redeemed in part through a distribution of portfolio securities. Pursuant to Rule 18f-1, the Fund must pay in cash all requests for redemption by any shareholder of record, limited in amount with respect to each shareholder during any ninety-day period to the lesser of $250,000 or 1% of the net value of the Fund at the beginning of such period. Any such distributions will be taxable to the shareholder. Each Fund may redeem its shares if the Board of Trustees determines that failure to do so may have materially adverse consequences to fund shareholders, such as in a situation where fund expenses on a per share basis are deemed to be excessive. PURCHASES AND SALES THROUGH BROKER DEALERS The Funds may be purchased through broker dealers and other intermediaries. Each Fund has authorized one or more brokers to receive on its behalf purchase and redemption orders. Such brokers are authorized to designate other intermediaries to receive purchase and redemption orders on each Fund's behalf. The Fund will be deemed to have received a purchase or redemption order when an authorized broker or, if applicable, a broker's authorized designee, received the order. Customer orders will be priced at the Fund's net asset value next computed after they are received by an authorized broker or the broker's authorized designee. PERFORMANCE INFORMATION Each Fund's total returns are based on the overall dollar or percentage change in value of a hypothetical investment in the Fund, assuming all dividends and distributions are reinvested. Average annual total return reflects the hypothetical annually compounded return that would have produced the same cumulative total return if the Fund's performance had been constant over the entire period presented. Because average annual total returns tend to smooth out variations in a Fund's returns, investors should recognize that they are not the same as actual year-by-year returns. Average annual return is based on historical earnings and is not intended to indicate future performance. For the purposes of quoting and comparing the performance of a Fund to that of other mutual funds and to other relevant market indices in advertisements, performance will be stated in terms of average annual total return. Under regulations adopted by the Securities and Exchange Commission, funds that intend to advertise performance must include average annual total return quotations calculated according to the following formula: n P(1+T) = ERV Where: P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years (1, 5, or 10) ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the 1-, 5-, or 10- year period, at the end of such period (or fractional portion thereof). Under the foregoing formula, the time periods used in advertising will be based on rolling calendar quarters, updated to the last day of the most recent quarter prior to submission of the advertising for publication, and will cover 1, 5, and 10 year periods of the applicable Fund's existence or shorter periods dating from the commencement of the Fund's registration. In calculating the ending redeemable value, all dividends and distributions by the Fund are assumed to have been reinvested at net asset value as described in the Prospectus on the reinvestment dates during the period. Additionally, redemption of shares is assumed to occur at the end of each applicable time period. - 12 - The foregoing information should be considered in light of a Fund's investment objectives and policies, as well as the risks incurred in the Fund's investment practices. Each Fund's investment performance will vary depending upon market conditions, the composition of the Fund's portfolio and operating expenses of the Fund. These factors and possible differences in the methods and time periods used in calculating non-standardized investment performance should be considered when comparing a Fund's performance to those of other investment companies or investment vehicles. Future results will be affected by the future composition of the Fund's portfolio, as well as by changes in the general level of interest rates, and general economic and other market conditions. The average annual total return of the Fund for the period July 1, 1997 (commencement of operations) to December 31, 1998 was 46.46% and for the fiscal year ended December 31, 1998 was 104.17%. Each Fund may also advertise total return which is calculated differently from average annual total return. Total return performance for a specific period (year to date, calendar quarter, fiscal year or portion thereof) is calculated by taking the initial investment in the Fund's shares on the first day of the period and the redeemable value of that investment at the end of the period. The total return percentage is then determined by subtracting the initial investment from the redeemable value and dividing the remainder by the initial investment and expressing the result as a percentage. The calculation assumes that all income and capital gains dividends by the Fund have been reinvested at net asset value on the reinvestment dates during the period. Total return may also be shown as the increased dollar value of the hypothetical investment over the period. A quotation of a Fund's total return will always be accompanied by the Fund's average annual total return. The total returns for the Berkshire Focus Fund for various periods are as follows: PERIOD ENDED ------------ December 31, 1997(a) -12.60% December 31, 1998(b) 58.06% December 31, 1998(c) 104.17% December 31, 1998(d) 77.40% (a) From July 1, 1997 to December 31, 1997. (b) From September 30, 1998 to December 31, 1998. (c) From December 31, 1997 to December 31, 1998. (d) From July 1, 1997 to December 31, 1998. Each Fund may also advertise performance information (a "non-standardized quotation") which is calculated differently from "average annual total return." A non-standardized quotation of total return may be a cumulative return which measures the percentage change in the value of an account between the beginning and end of a period, assuming no activity in the account other than reinvestment of dividends and capital gains distributions. A non-standardized quotation may also be an average annual compounded rate of return over a specified period, which may be a period different from those specified for "average annual total return." In addition, a non-standardized quotation may be an indication of the value of a $10,000 investment (made on the date of the initial public offering of the Fund's shares) as of the end of a specified period. A non-standardized quotation will always be accompanied by the Fund's "average annual total return" as described above. Performance information for a Fund may be compared, in reports and promotional literature, to the performance of unmanaged indices which may assume reinvestment of dividends or interest but generally do not reflect deductions for administrative and management costs. Examples include, but are not limited to the Dow Jones Industrial Average (DJIA), Standard & Poor's 500 Composite Stock Price Index (S&P 500), the NASDAQ Composite Index (NASDAQ Composite) and the Russell 2000 Index. The Dow Jones Industrial Average is a measurement of general market price movement for 30 widely held stocks listed on the New York Stock Exchange. The S&P 500 Index is an unmanaged index of 500 stocks, the purpose of which is to portray the pattern of common stock price movement. The NASDAQ Composite Index is an unmanaged index which averages the trading prices of more than 3,000 domestic over-the-counter companies. The Russell 2000 Index, representing approximately 11% of the U.S. equity market, is an unmanaged index comprised of the 2,000 smallest U.S. domiciled publicly-traded common stocks in the Russell 3000 Index (an unmanaged index of the 3,000 largest U.S. domiciled publicly-traded common stocks by market capitalization representing approximately 98% of the U.S. publicly-traded equity market). - 13 - In assessing such comparisons of performance an investor should keep in mind that the composition of the investments in the reported indices and averages is not identical to either Fund's portfolio, that the averages are generally unmanaged and that the items included in the calculations of such averages may not be identical to the formula used by the Fund to calculate its performance. In addition, there can be no assurance that the Fund will continue this performance as compared to such other averages. From time to time, in marketing and other fund literature, each Fund's performance may be compared to the performance of other mutual funds in general or to the performance of particular types of mutual funds with similar investment goals, as tracked by independent organizations. Among these organizations, Lipper Analytical Services, Inc. ("Lipper"), a widely used independent research firm which ranks mutual funds by overall performance, investment objectives, and assets, may be cited. Lipper performance figures are based on changes in net asset value, with all income and capital gain dividends reinvested. Such calculations do not include the effect of any sales charges imposed by other funds. Each Fund will be compared to Lipper's appropriate fund category, that is, by fund objective and portfolio holdings. Each Fund's performance may also be compared to the average performance of its Lipper category. Each Fund's performance may also be compared to the performance of other mutual funds by Morningstar, Inc. which ranks funds on the basis of historical risk and total return. Morningstar's rankings range from five stars (highest) to one star (lowest) and represent Morningstar's assessment of the historical risk level and total return of a fund as a weighted average for three, five and ten year periods. Ranks are not absolute or necessarily predictive of future performance. Performance rankings and ratings reported periodically in national financial publications such as Barron's and Fortune also may be used. PORTFOLIO TRANSACTIONS AND BROKERAGE Subject to policies established by the Board of Trustees of the Trust, the Investment Adviser is responsible for each Fund's portfolio decisions and the placing of each Fund's portfolio transactions. In placing portfolio transactions, the Investment Adviser seeks the best qualitative execution for the Funds, taking into account such factors as price (including the applicable brokerage commission or dealer spread), the execution capability, financial responsibility and responsiveness of the broker or dealer and the brokerage and research services provided by the broker or dealer. The Investment Adviser generally seeks favorable prices and commission rates that are reasonable in relation to the benefits received. The Investment Adviser is specifically authorized to select brokers or dealers who also provide brokerage and research services to the Funds and/or the other accounts over which the Investment Adviser exercises investment discretion and to pay such brokers or dealers a commission in excess of the commission another broker or dealer would charge if the Investment Adviser determines in good faith that the commission is reasonable in relation to the value of the brokerage and research services provided. The determination may be viewed in terms of a particular transaction or the Investment Adviser's overall responsibilities with respect to the Trust and to other accounts over which it exercises investment discretion. - 14 - Research services include supplemental research, securities and economic analyses, statistical services and information with respect to the availability of securities or purchasers or sellers of securities and analyses of reports concerning performance of accounts. The research services and other information furnished by brokers through whom the Funds effect securities transactions may also be used by the Investment Adviser in servicing all of its accounts. Similarly, research and information provided by brokers or dealers serving other clients may be useful to the Investment Adviser in connection with its services to the Funds. Although research services and other information are useful to the Funds and the Investment Adviser, it is not possible to place a dollar value on the research and other information received. It is the opinion of the Board of Trustees and the Investment Adviser that the review and study of the research and other information will not reduce the overall cost to the Investment Adviser of performing its duties to the Funds under the Advisory Agreements. Over-the-counter transactions will be placed either directly with principal market makers or with broker-dealers, if the same or a better price, including commissions and executions, is available. Fixed income securities are normally purchased directly from the issuer, an underwriter or a market maker. Purchases include a concession paid by the issuer to the underwriter and the purchase price paid to a market maker may include the spread between the bid and asked prices. For the period July 1, 1997 (commencement of operations) to December 31, 1997 and for the fiscal year ended December 31, 1998, the Berkshire Focus Fund paid brokerage commissions of $1,941.00 and $2,650.98, respectively. CUSTODIAN Firstar Bank, N.A., 425 Walnut Street, M.L. 6118, Cincinnati, Ohio 45202 has been retained to act as Custodian of the each Fund's investments. The Custodian Acts as each Fund's depository, safekeeps its portfolio securities and investments, collects all income and other payments with respect thereto, disburses funds at the Fund's request and maintains records in connection with its duties. TRANSFER AGENT The Trust has entered into an agreement with Mutual Shareholder Services, LLC, 1301 East Ninth Street, Suite 1005, Cleveland, Ohio, 44114 ("MSS"), to act as each Fund's transfer agent, effective upon conversion of all records, and to provide the Trust with accounting services, record-keeping and shareholder service functions. The conversion was completed in January, 1999. Until the conversion, Berkshire Capital acted as the Trust's transfer agent and dividend paying agent. For its services as fund accountant, MSS receives an annual fee from Berkshire Capital based upon the average value of each Fund, with a maximum annual fee of $59,250. At Fund net asset values averaging less than $25 million, the annual fee would be $21,000. For all other services provided, MSS receives from Berkshire Capital an annual fee of $9.25 per shareholder (with a minimum charge of $775 per month) for shareholders services provided and a monthly fee of $10 per state for state registration and qualification of Fund shares provided. - 15 - AUDITORS The firm of McCurdy & Associates CPA's, Inc., 27955 Clemens Road, Westlake, Ohio 44145 has been selected as independent auditors for the Trust for the year ending December 31, 1999. McCurdy & Associates CPA's, Inc. performs an annual audit of each Fund's financial statements and provides financial, tax and accounting consulting services as requested. FINANCIAL STATEMENTS The financial statements and independent auditors report required to be included in the Statement of Additional Information are incorporated herein by reference to the Trust's Annual Report to Shareholders for the fiscal year ended December 31, 1998. The Trust will provide the Annual Report without charge at written or telephone request. The financial statements for the period ended June 30, 1999 are also incorporated by reference to the Trust's unaudited Semi-Annual Report to shareholders for the period ended June 30, 1999. - 16 - PART C OTHER INFORMATION Item 23. Financial Statements and Exhibits (a) Articles of Incorporation. (i) Copy of Registrant's Declaration of Trust, which was filed as an Exhibit to Registrant's Pre-Effective Amendment No. 1, is hereby incorporated by reference. (ii) Copy of August 8, 1998 Addendum to Registrant's Declaration of Trust, which was filed as an Exhibit to Registrant's Post-Effective Amendment No. 2, is hereby incorporated by reference. (iii) Copy of August 8, 1998 Certificate of Amendment to Registrant's Declaration of Trust, which was filed as an Exhibit to Registrant's Post-Effective Amendment No. 2, is hereby incorporated by reference. (iv) Copy of December 19, 1999 Certificate of Amendment of Certificate of Trust is filed herewith. (b) By-Laws. None. (c) Instruments Defining Rights of Security Holder. None (other than in the Declaration of Trust, as amended.) (d) Investment Advisory Contracts. (i) Copy of Registrant's Amended and Restated Investment Advisory Agreement with Berkshire Capital Holdings, Inc. is filed herewith. (ii) Copy of Registrant's Investment Advisory Agreement with Berkshire Capital Holdings, Inc. for the Berkshire Technology Fund is filed herewith. (e) Underwriting Contracts. None (f) Bonus or Profit Sharing Contracts. None. (g) Custodial Agreements. Copy of Registrant's agreement with the Custodian, Firstar Bank, N.A., is filed herewith. (h) Other Material Contracts. (i) Copy of Registrant's Administration Agreement with Berkshire Capital Holdings, Inc. for the Berkshire Focus Fund is filed herewith. (ii) Copy of Registrant's Administration Agreement with Berkshire Capital Holdings, Inc. for the Berkshire Technology Fund is filed herewith. (i) Legal Opinion and Consent of John F. Splain, Esq. is filed herewith. (j) Other Opinions. Consent of McCurdy & Associates CPA's, Inc. is filed herewith. (k) Omitted Financial Statements. None. (l) Initial Capital Agreements. Subscription Agreements of the Berkshire Capital Growth & Value Fund, which were filed as an Exhibit to Registrant's Pre-Effective Amendment No. 1, are hereby incorporated by reference. (m) Rule 12b-1 Plan. None. (n) Financial Data Schedule. None. (o) Rule 18f-3 Plan. None. (p) Power of Attorney. Powers of Attorney for the Trustees of the Trust, which were filed as part of Registrant's Post-Effective Amendment Nos. 1 and 2, are hereby incorporated by reference. Item 24. Control Persons. None. Item 25. Indemnification Under section 3817(a) of the Delaware Business Trust Act, a Delaware business trust has the power to indemnify and hold harmless any trustee, beneficial owner or other person from and against any and all claims and demands whatsoever. Reference is made to sections 5.1 and 5.2 of the Declaration of Trust of The Berkshire Funds (the "Trust") (which was filed as an exhibit to the Trust's Pre-Effective Amendment No. 1) pursuant to which no trustee, officer, employee or agent of the Trust shall be subject to any personal liability, when acting in his or her individual capacity, except for his own bad faith, willful misfeasance, gross negligence or reckless disregard of his or her duties. The Trust shall indemnify each of its trustees, officers, employees and agents against all liabilities and expenses reasonably incurred by him or her in connection with the defense or disposition of any actions, suits or other proceedings by reason of his or her being or having been a trustee, officer, employee or agent, except with respect to any matter as to which he or she shall have been adjudicated to have acted in or with bad faith, willful misfeasance, gross negligence or reckless disregard of his or her duties. The Registrant may maintain a standard mutual fund and investment advisory professional and directors and officers liability policy. The policy, if maintained, would provide coverage to the Registrant, its Trustees and officers, and could cover its Advisers, among others. Coverage under the policy would include losses by reason of any act, error, omission, misstatement, misleading statement, neglect or breach of duty. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Trust pursuant to the foregoing, the Trust has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy and therefore may be unenforceable. In the event that a claim for indemnification (except insofar as it provides for the payment by the Trust of expenses incurred or paid by a trustee, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted against the Trust by such trustee, officer or controlling person and the Securities and Exchange Commission is still in the same opinion, the Trust will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. Indemnification provisions exist in the Investment Advisory and Administration Agreement under the headings "Limitation of Liability" which are identical to those in the Declaration of Trust noted above. Item 26. Activities of Investment Adviser (a) Berkshire Capital Holdings, Inc., 475 Milan Drive, #103, San Jose, California 95134-2453 ("Berkshire") is a registered investment adviser. It has engaged in no other business during the past two fiscal years. (b) The following list sets forth other substantial business activities of the directors and officers of Berkshire during the past two years - None. Item 27. Principal Underwriter None. Item 28. Location of Accounts and Records The Registrant will maintain physical possession of the Declaration of Trust, By-Laws and minute books. All other accounts, books and other documents required to be maintained by section 31(a) of the Investment Company Act of 1940 and the rules promulgated thereunder will be maintained by the Registrant, Firstar Bank, N.A., 425 Walnut Street, M.L. 6118, Cincinnati, Ohio 45202 as Custodian for the Registrant or Mutual Shareholder Services, LLC, 1301 E. Ninth Street, Suite 1005, Cleveland, Ohio 44114. Item 29. Management Services. Not Discussed in Parts A or B. None. Item 30. Undertakings None. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California on the 22nd day of December, 1999. THE BERKSHIRE FUNDS By: /s/ MALCOLM R. FOBES ------------------------------ MALCOLM R. FOBES, III, President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. December 22, 1999 /s/ MALCOLM R. FOBES ------------------------------------ MALCOLM R. FOBES, III President, Treasurer, Chief Financial Officer & Trustee RONALD G. SEGER* *By: /s/ Malcolm R. Fobes III Trustee ------------------------------------ Attorney In Fact LELAND F. SMITH* Trustee December 22, 1999 ANDREW W. BROER* Trustee EX-99 2 EXIBITS EXHIBIT INDEX 1. Certificate of Amendment of Certificate of Trust...............EX-99.23.a.4 2. Investment Advisory Agreement for Berkshire Focus Fund.........EX-99.23.d.1 3. Investment Advisory Agreement for Berkshire Technology Fund....EX-99.23.d.2 4. Custody Agreement................................................EX-99.23.g 5. Administration Agreement for Berkshire Focus Fund..............EX-99.23.h.1 6. Administration Agreement for Berkshire Technology Fund.........EX-99.23.h.2 7. Legal Opinion and Consent........................................EX-99.23.i 8. Consent of Independent Public Accountants........................EX-99.23.j CERTIFICATE OF AMENDMENT of CERTIFICATE OF TRUST of THE BERKSHIRE FUNDS This Certificate of Amendment is filed in accordance with the provisions of the Delaware Business Trust Act (12 Del. C. Section 380 et. seq.) and sets forth the following: 1. The name of the business trust is THE BERKSHIRE FUNDS (the "Trust"). 2. The Certificate of Trust filed on November 25, 1996 is to be amended to reflect the establishment of an additional series of shares of the Trust and the designation of such series as the "Berkshire Technology Fund." The relative rights and preferences of the Berkshire Technology Fund shall be those rights and preferences set forth in Section 8.8 of the Trust's Declaration of Trust. 3. This Certificate of Amendment is to be effective upon this filing with the Secretary of State of the State of Delaware. The undersigned, in order to amend the Certificate of Trust of THE BERKSHIRE FUNDS under the laws of the State of Delaware, hereby execute this Certificate of Amendment on this 19th day of December, 1999. /s/ Malcolm R. Fobes III ----------------------------- Malcolm R. Fobes III, Trustee /s/ Ronald G. Seger ------------------------ Ronald G. Seger, Trustee /s/ Leland F. Smith ------------------------ Leland F. Smith, Trustee /s/ Andrew W. Broer ------------------------ Andrew W. Broer, Trustee AMENDED AND RESTATED INVESTMENT ADVISORY AGREEMENT THIS INVESTMENT ADVISORY AGREEMENT ("Agreement"), made and entered into the 1st day of January, 1999, and amended this 19th day of December, 1999, by and between The Berkshire Funds, a Delaware business trust (the "Trust"), and Berkshire Capital Holdings, Inc., a California corporation (the "Investment Adviser"). W I T N E S S E T H: WHEREAS, the Trust, an open-end, non-diversified investment company registered under the Investment Company Act of 1940 (the "1940 Act"), wishes to retain the Investment Adviser to provide investment advisory services to the Berkshire Focus Fund (the "Fund"), a series of the Trust; and WHEREAS, the Investment Adviser is willing to furnish such services on the terms and conditions hereinafter set forth; and WHEREAS, management has recommended that certain non-material revisions be made to this Agreement, to (i) reflect a change in the names of the Trust and the Fund and (ii) clarify that this Agreement relates to the Investment Adviser's services to the Fund only and not to future series of the Trust; and WHEREAS, the Board of Trustees has determined that the revisions recommended by management will have no impact on existing or future shareholders of the Fund; NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, it is agreed as follows: 1. EMPLOYMENT OF THE INVESTMENT ADVISER. The Trust hereby appoints the Investment Adviser to manage the investment and reinvestment of assets of the Fund for the period and on the terms set forth in this Agreement. The Investment Adviser accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. 2. OBLIGATIONS OF THE TRUST. The Trust shall at all times inform the Investment Adviser as to the securities owned by it, the funds available or to become available for investment by it, and generally as to the condition of its affairs. It shall furnish the Investment Adviser with such other documents and information with regard to its affairs as the Investment Adviser may from time to time reasonably request. 3. OBLIGATIONS OF THE INVESTMENT ADVISER. Subject to the direction and control of the Trust's Board of Trustees, the Investment Adviser shall regularly provide the Fund with investment research, advice, management and supervision and shall furnish a continuous investment program for the Fund's portfolio of securities consistent with the Fund's investment objective, policies, and limitations as stated in the Fund's current Prospectus and Statement of Additional Information. The Investment Adviser shall determine from time to time what securities will be purchased, retained or sold by the Fund, and shall implement those decisions, all subject to the provisions of the Trust's Declaration of Trust, the 1940 Act, the applicable rules and regulations of the Securities and Exchange Commission, and other applicable federal and state laws, as well as the investment objectives, policies, and limitations of the Fund. In placing orders for the Fund with brokers and dealers with respect to the execution of the Fund's securities transactions, the Investment Adviser shall attempt to obtain the best net results. In doing so, the Investment Adviser may consider such factors which it deems relevant to the Fund's best interest, such as price, the size of the transaction, the nature of the market for the security, the amount of the commission, the timing of the transaction, the reputation, experience and financial stability of the broker-dealer involved and the quality of service rendered by the broker-dealer in other transactions. The Investment Adviser shall have the discretionary authority to utilize certain broker-dealers even though it may result in the payment by the Fund of an amount of commission for effecting a securities transaction in excess of the amount of commission another broker-dealer would have charged for effecting that transaction, providing, however, that the Investment Adviser had determined that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by the broker-dealer effecting the transaction. In no instance will portfolio securities be purchased from or sold to the Investment Adviser or any affiliated person thereof except in accordance with the rules and regulations promulgated by the Securities and Exchange Commission pursuant to the 1940 Act. The Investment Adviser shall also provide advice and recommendations with respect to other aspects of the business and affairs of the Fund and shall perform such other functions of management and supervision as may be directed by the Board of Trustees of the Trust, provided that in no event shall the Investment Adviser be responsible for any expense occasioned by the performance of such functions. 4. EXPENSES OF THE FUND. The Investment Adviser is responsible for (i) the compensation of any of the Trust's trustees, officers and employees who are interested persons of the Investment Adviser, (ii) compensation of the Investment Adviser's personnel and other expenses in connection with the provisions of portfolio management services under this Agreement, and (iii) expenses of printing and distributing the Fund's prospectus and sales and advertising materials to prospective clients. Other than as herein specifically indicated, the Investment Adviser shall not be responsible for the Fund's expenses. Specifically, the Investment Adviser will not be responsible, except to the extent of the reasonable compensation of employees of the Trust whose services may be used by the Investment Adviser hereunder, for any of the following expenses of the Fund, which expenses shall be borne by Fund: legal and audit expenses, organizational expenses; interest; taxes; governmental fees; industry association fees; the cost (including brokerage commissions or charges, if any) of securities purchased or sold by the Fund and any losses incurred in connection herewith; fees, if any, of custodians, transfer agents, registrars or other agents; distribution fees; expenses of preparing share certificates; expenses relating to the redemption or repurchase of the Fund's shares; fees and expenses of registering the Fund's shares under the federal securities laws and of qualifying its shares under applicable state Blue Sky laws, including expenses attendant upon renewing such registrations and qualifications; expenses of preparing, setting in print, printing and distributing prospectuses, proxy statements, reports, notices, and dividends to fund shareholders; cost of stationary; costs of shareholders and other meetings of the Fund; compensation and expenses of the independent trustees of the Trust; fidelity bond and other insurance covering the Trust and its officers and trustees. 5. LIMITATIONS ON SALARIES. No trustee, officer or employee of the Trust shall receive from the Fund any salary or other compensation as such trustee, officer or employee while he is at the same time director, officer or employee of the Investment Adviser or any affiliated company of the Investment Adviser. This paragraph shall not apply to trustees, executive committee members, consultants and other persons who are not regular members of the Investment Adviser's or any affiliated company's staff. 6. COMPENSATION. As compensation for the services performed by the Investment Adviser, the Fund shall pay the Investment Adviser, as promptly as possible after the last day of each month, a fee, accrued each calendar day (including weekends and holidays) at a rate of 1.5% per annum of the daily net assets of the Fund. The Investment Adviser shall reduce such fee or, if necessary, make payments to the Fund to the extent required to satisfy any limitations with respect thereto imposed by the securities laws or regulations thereunder of any state in which the Fund's shares are qualified for sale. The daily net assets of the Fund shall be computed as of the time of the regular close of business of the New York Stock Exchange, or such other time as may be determined by the Board of Trustees of the Trust. Any of such payments as to which the Investment Adviser may so request shall be accompanied by a report of the Fund prepared either by the Trust or by a reputable firm of independent accountants which shall show the amount properly payable to the Investment Adviser under this Agreement and detailed computation thereof. 7. LIMITATION OF LIABILITY. The Investment Adviser assumes no responsibility under this Agreement other than to render the services called for hereunder in good faith, and shall not be responsible for any action of the Board of Trustees of the Trust in the following or declining to follow any advice or recommendation of the Investment Adviser; provided that nothing in this Agreement shall protect the Investment Adviser against any liability to the Fund or its stockholders to which it would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties hereunder. 8. INDEPENDENT CONTRACTOR. The Investment Adviser shall be an independent contractor and shall have no authority to act for or represent the Fund in its investment commitments unless otherwise provided. No agreement, bid, offer, commitment, contract or other engagement entered into by the Investment Adviser whether on behalf of the Investment Adviser or whether purporting to have been entered into on behalf of the Fund shall be binding upon the Fund, and all acts authorized to be done by the Investment Adviser under this Agreement shall be done by it as an independent contractor and not as an agent. 9. ACTIVITIES OF THE INVESTMENT ADVISER. Nothing in this Agreement shall limit or restrict the right of any director, officer, or employee of the Investment Adviser who may also be a trustee, officer, or employee of the Trust, to engage in any other business or to devote his time and attention in part to the management or other aspects of any other business, whether of a similar nature or dissimilar nature, nor to limit or restrict the right of the Investment Adviser to engage in any other business or to render services of any kind, including investment advisory services, to any other corporation, firm, individual or association. 10. DEFINITIONS. As used in this Agreement, the terms "assignment," "interested person," and "majority of the outstanding voting securities" shall have meanings given to them by Section 2(a) of the 1940 Act, subject to such exemptions as may be granted by the Securities and Exchange Commission by any rule, regulation or order. 11. TERMINATION. This Agreement shall terminate automatically in the event of its assignment by the Investment Adviser and shall not be assignable by the Trust without consent of the Investment Adviser. This Agreement may also be terminated at any time, without payment of penalty (i) by the Trust either by vote of the Board of Trustees of the Trust or by vote of a majority of the outstanding voting securities of the Fund, on 60 days written notice to the Investment Adviser, or (ii) by the Investment Adviser on 60 days written notice to the Trust. Upon the termination of this Agreement, the obligations of all the parties hereunder shall cease and terminate as of the date of such termination, except for any obligation to respond for a breach of this Agreement committed prior to such termination and except or the obligation of the Fund to pay to the Investment Adviser the fee provided in Paragraph 6 hereof, prorated to the date of termination. 12. TERM. This Agreement shall become effective on January 1, 1999, and shall continue in effect for one year and from year to year thereafter only so long as specifically approved annually, by (i) the Trust's Board of Trustees and by a vote of the holders of a majority of the outstanding voting securities of the Fund, or (ii) a majority of the Trustees who are not parties to the Agreement or "interested persons" (as defined in the Act) of any such party cast in person at a meeting called for the purpose of voting on such approval. 13. AMENDMENTS. No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, and no material amendment of this agreement shall be effective until approved by vote of the holders of a majority of the Fund's outstanding voting securities. 14. SEVERABILITY. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and sealed by their officers thereunto duly authorized on the day and year first above written. ATTEST: THE BERKSHIRE FUNDS By: /s/ Ronald G. Seger By: /s/ Malcolm R. Fobes III ------------------- ------------------------ Ronald G. Seger Malcolm R. Fobes III Secretary President ATTEST: BERKSHIRE CAPITAL HOLDINGS, INC. By: /s/ Ronald G. Seger By: /s/ Malcolm R. Fobes III ------------------- ------------------------ Ronald G. Seger Malcolm R. Fobes III Secretary Chairman & CEO INVESTMENT ADVISORY AGREEMENT THIS INVESTMENT ADVISORY AGREEMENT ("Agreement"), made and entered into this 19th day of December, 1999, by and between The Berkshire Funds, a Delaware business trust (the "Trust"), and Berkshire Capital Holdings, Inc., a California corporation (the "Investment Adviser"). W I T N E S S E T H: WHEREAS, the Trust, an open-end, non-diversified investment company registered under the Investment Company Act of 1940 (the "1940 Act"), wishes to retain the Investment Adviser to provide investment advisory services to the Berkshire Technology Fund (the "Fund"), a series of the Trust; and WHEREAS, the Investment Adviser is willing to furnish such services on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, it is agreed as follows: 1. EMPLOYMENT OF THE INVESTMENT ADVISER. The Trust hereby appoints the Investment Adviser to manage the investment and reinvestment of assets of the Fund for the period and on the terms set forth in this Agreement. The Investment Adviser accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. 2. OBLIGATIONS OF THE TRUST. The Trust shall at all times inform the Investment Adviser as to the securities owned by it, the funds available or to become available for investment by it, and generally as to the condition of its affairs. It shall furnish the Investment Adviser with such other documents and information with regard to its affairs as the Investment Adviser may from time to time reasonably request. 3. OBLIGATIONS OF THE INVESTMENT ADVISER. Subject to the direction and control of the Trust's Board of Trustees, the Investment Adviser shall regularly provide the Fund with investment research, advice, management and supervision and shall furnish a continuous investment program for the Fund's portfolio of securities consistent with the Fund's investment objective, policies, and limitations as stated in the Fund's current Prospectus and Statement of Additional Information. The Investment Adviser shall determine from time to time what securities will be purchased, retained or sold by the Fund, and shall implement those decisions, all subject to the provisions of the Trust's Declaration of Trust, the 1940 Act, the applicable rules and regulations of the Securities and Exchange Commission, and other applicable federal and state laws, as well as the investment objectives, policies, and limitations of the Fund. In placing orders for the Fund with brokers and dealers with respect to the execution of the Fund's securities transactions, the Investment Adviser shall attempt to obtain the best net results. In doing so, the Investment Adviser may consider such factors which it deems relevant to the Fund's best interest, such as price, the size of the transaction, the nature of the market for the security, the amount of the commission, the timing of the transaction, the reputation, experience and financial stability of the broker-dealer involved and the quality of service rendered by the broker-dealer in other transactions. The Investment Adviser shall have the discretionary authority to utilize certain broker-dealers even though it may result in the payment by the Fund of an amount of commission for effecting a securities transaction in excess of the amount of commission another broker-dealer would have charged for effecting that transaction, providing, however, that the Investment Adviser had determined that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by the broker-dealer effecting the transaction. In no instance will portfolio securities be purchased from or sold to the Investment Adviser or any affiliated person thereof except in accordance with the rules and regulations promulgated by the Securities and Exchange Commission pursuant to the 1940 Act. The Investment Adviser shall also provide advice and recommendations with respect to other aspects of the business and affairs of the Fund and shall perform such other functions of management and supervision as may be directed by the Board of Trustees of the Trust, provided that in no event shall the Investment Adviser be responsible for any expense occasioned by the performance of such functions. 4. EXPENSES OF THE FUND. The Investment Adviser is responsible for (i) the compensation of any of the Trust's trustees, officers and employees who are interested persons of the Investment Adviser, (ii) compensation of the Investment Adviser's personnel and other expenses in connection with the provisions of portfolio management services under this Agreement, and (iii) expenses of printing and distributing the Fund's prospectus and sales and advertising materials to prospective clients. Other than as herein specifically indicated, the Investment Adviser shall not be responsible for the Fund's expenses. Specifically, the Investment Adviser will not be responsible, except to the extent of the reasonable compensation of employees of the Trust whose services may be used by the Investment Adviser hereunder, for any of the following expenses of the Fund, which expenses shall be borne by Fund: legal and audit expenses, organizational expenses; interest; taxes; governmental fees; industry association fees; the cost (including brokerage commissions or charges, if any) of securities purchased or sold by the Fund and any losses incurred in connection herewith; fees, if any, of custodians, transfer agents, registrars or other agents; distribution fees; expenses of preparing share certificates; expenses relating to the redemption or repurchase of the Fund's shares; fees and expenses of registering the Fund's shares under the federal securities laws and of qualifying its shares under applicable state Blue Sky laws, including expenses attendant upon renewing such registrations and qualifications; expenses of preparing, setting in print, printing and distributing prospectuses, proxy statements, reports, notices, and dividends to fund shareholders; cost of stationary; costs of shareholders and other meetings of the Fund; compensation and expenses of the independent trustees of the Trust; fidelity bond and other insurance covering the Trust and its officers and trustees. 5. LIMITATIONS ON SALARIES. No trustee, officer or employee of the Trust shall receive from the Fund any salary or other compensation as such trustee, officer or employee while he is at the same time director, officer or employee of the Investment Adviser or any affiliated company of the Investment Adviser. This paragraph shall not apply to trustees, executive committee members, consultants and other persons who are not regular members of the Investment Adviser's or any affiliated company's staff. 6. COMPENSATION. As compensation for the services performed by the Investment Adviser, the Fund shall pay the Investment Adviser, as promptly as possible after the last day of each month, a fee, accrued each calendar day (including weekends and holidays) at a rate of 1.5% per annum of the daily net assets of the Fund. The Investment Adviser shall reduce such fee or, if necessary, make payments to the Fund to the extent required to satisfy any limitations with respect thereto imposed by the securities laws or regulations thereunder of any state in which the Fund's shares are qualified for sale. The daily net assets of the Funds shall be computed as of the time of the regular close of business of the New York Stock Exchange, or such other time as may be determined by the Board of Trustees of the Trust. Any of such payments as to which the Investment Adviser may so request shall be accompanied by a report of the Fund prepared either by the Trust or by a reputable firm of independent accountants which shall show the amount properly payable to the Investment Adviser under this Agreement and detailed computation thereof. 7. LIMITATION OF LIABILITY. The Investment Adviser assumes no responsibility under this Agreement other than to render the services called for hereunder in good faith, and shall not be responsible for any action of the Board of Trustees of the Trust in the following or declining to follow any advice or recommendation of the Investment Adviser; provided that nothing in this Agreement shall protect the Investment Adviser against any liability to the Fund or its stockholders to which it would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties hereunder. 8. INDEPENDENT CONTRACTOR. The Investment Adviser shall be an independent contractor and shall have no authority to act for or represent the Fund in its investment commitments unless otherwise provided. No agreement, bid, offer, commitment, contract or other engagement entered into by the Investment Adviser whether on behalf of the Investment Adviser or whether purporting to have been entered unto on behalf of the Fund shall be binding upon the Fund, and all acts authorized to be done by the Investment Adviser under this Agreement shall be done by it as an independent contractor and not as an agent. 9. ACTIVITIES OF THE INVESTMENT ADVISER. Nothing in this Agreement shall limit or restrict the right of any director, officer, or employee of the Investment Adviser who may also be a trustee, officer, or employee of the Trust, to engage in any other business or to devote his time and attention in part to the management or other aspects of any other business, whether of a similar nature or dissimilar nature, nor to limit or restrict the right of the Investment Adviser to engage in any other business or to render services of any kind, including investment advisory services, to any other corporation, firm, individual or association. 10. DEFINITIONS. As used in this Agreement, the terms "assignment," "interested person," and "majority of the outstanding voting securities" shall have meanings given to them by Section 2(a) of the 1940 Act, subject to such exemptions as may be granted by the Securities and Exchange Commission by any rule, regulation or order. 11. TERMINATION. This Agreement shall terminate automatically in the event of its assignment by the Investment Adviser and shall not be assignable by the Trust without consent of the Investment Adviser. This Agreement may also be terminated at any time, without payment of penalty (i) by the Trust either by vote of the Board of Trustees of the Trust or by vote of a majority of the outstanding voting securities of the Fund, on 60 days written notice to the Investment Adviser, or (ii) by the Investment Adviser on 60 days written notice to the Trust. Upon the termination of this Agreement, the obligations of all the parties hereunder shall cease and terminate as of the date of such termination, except for any obligation to respond for a breach of this Agreement committed prior to such termination and except or the obligation of the Fund to pay to the Investment Adviser the fee provided in Paragraph 6 hereof, prorated to the date of termination. 12. TERM. This Agreement shall become effective on January 1, 1999, and shall continue in effect for one year and from year to year thereafter only so long as specifically approved annually, by (i) the Trust's Board of Trustees and by a vote of the holders of a majority of the outstanding voting securities of the Fund, or (ii) a majority of the Trustees who are not parties to the Agreement or "interested persons" (as defined in the Act) of any such party cast in person at a meeting called for the purpose of voting on such approval. 13. AMENDMENTS. No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, and no material amendment of this agreement shall be effective until approved by vote of the holders of a majority of the Fund's outstanding voting securities. 14. SEVERABILITY. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and sealed by their officers thereunto duly authorized on the day and year first above written. ATTEST: THE BERKSHIRE FUNDS By: /s/ Ronald G. Seger By: /s/ Malcolm R. Fobes III ------------------- ------------------------ Ronald G. Seger Malcolm R. Fobes III Secretary President ATTEST: BERKSHIRE CAPITAL HOLDINGS, INC. By: /s/ Ronald G. Seger By: /s/ Malcolm R. Fobes III ------------------- ------------------------ Ronald G. Seger Malcolm R. Fobes III Secretary Chairman & CEO CUSTODY AGREEMENT BETWEEN FIRSTAR BANK, N.A. AND THE BERKSHIRE FUNDS CUSTODY AGREEMENT This agreement (the "Agreement") is entered into as of the 11th day of October, 1999, by and between The Berkshire Funds, a Delaware business trust (the "Trust") and Firstar Bank, National Association, (the "Custodian"), a national banking association having its principal office at 425 Walnut Street, Cincinnati, Ohio, 45202. WHEREAS, the Trust and the Custodian desire to enter into this Agreement to provide for the custody and safekeeping of the assets of the Trust as required by the Act (as hereafter defined). THEREFORE, in consideration of the mutual promises hereinafter set forth, the Trust and the Custodian agree as follows: ARTICLE I DEFINITIONS The following words and phrases, when used in this Agreement, unless the context otherwise requires, shall have the following meanings: ACT - the Investment Company Act of 1940, as amended. 1934 Act - the Securities and Exchange Act of 1934, as amended. AUTHORIZED PERSON - any person, whether or not any such person is an officer or employee of the Trust, who is duly authorized by the Board of Trustees of the Trust to give Oral Instructions and Written Instructions on behalf of the Trust or any Fund, and named in Appendix A attached hereto and as amended from time to time by resolution of the Board of Trustees, certified by an Officer, and received by the Custodian. BOARD OF TRUSTEES - the Trustees from time to time serving under the Trust's Agreement and Declaration of Trust, as from time to time amended. BOOK-ENTRY SYSTEM - a federal book-entry system as provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFT Part 350, or in such book-entry regulations of federal agencies as are substantially in the form of Subpart O. Page -1- BUSINESS DAY - any day recognized as a settlement day by The New York Stock Exchange, Inc. and any other day for which the Trust computes the net asset value of Shares of any fund. DEPOSITORY - The Depository Trust Company ("DTC"), a limited purpose trust company, its successor(s) and its nominee(s). Depository shall include any other clearing agency registered with the SEC under Section 17A of the 1934 Act which acts as a system for the central handling of Securities where all Securities of any particular class or series of an issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of the Securities provided that the Custodian shall have received a copy of a resolution of the Board of Trustees, certified by an Officer, specifically approving the use of such clearing agency as a depository for the Funds. DIVIDEND AND TRANSFER AGENT - the dividend and transfer agent appointed, from time to time, pursuant to a written agreement between the dividend and transfer agent and the Trust. FOREIGN SECURITIES - a) securities issued and sold primarily outside of the United States by a foreign government, a national of any foreign country, or a trust or other organization incorporated or organized under the laws of any foreign country or; b) securities issued or guaranteed by the government of the United States, by any state, by any political subdivision or agency thereof, or by any entity organized under the laws of the United States or of any state thereof, which have been issued and sold primarily outside of the United States. FUND - each series of the Trust listed in Appendix B and any additional series added pursuant to Proper Instructions. A series is individually referred to as a "Fund" and collectively referred to as the "Funds." MONEY MARKET SECURITY - debt obligations issued or guaranteed as to principal and/or interest by the government of the United States or agencies or instrumentalities thereof, commercial paper, obligations (including certificates of deposit, bankers' acceptances, repurchase agreements and reverse repurchase agreements with respect to the same), and time deposits of Page -2- domestic banks and thrift institutions whose deposits are insured by the Federal Deposit Insurance Corporation, and short-term corporate obligations where the purchase and sale of such securities normally require settlement in federal funds or their equivalent on the same day as such purchase and sale, all of which mature in not more than thirteen (13) months. NASD - the National Association of Securities Dealers, Inc. OFFICER - the Chairman, President, Secretary, Treasurer, any Vice President, Assistant Secretary or Assistant Treasurer of the Trust. ORAL INSTRUCTIONS - instructions orally transmitted to and received by the Custodian from an Authorized Person (or from a person that the Custodian reasonably believes in good faith to be an Authorized Person) and confirmed by Written Instructions in such a manner that such Written Instructions are received by the Custodian on the Business Day immediately following receipt of such Oral Instructions. PROPER INSTRUCTIONS - Oral Instructions or Written Instructions. Proper Instructions may be continuing Written Instructions when deemed appropriate by both parties. PROSPECTUS - the Trust's then currently effective prospectus and Statement of Additional Information, as filed with and declared effective from time to time by the Securities and Exchange Commission. SECURITY OR SECURITIES - Money Market Securities, common stock, preferred stock, options, financial futures, bonds, notes, debentures, corporate debt securities, mortgages, bank certificates of deposit, bankers' acceptances, mortgage-backed securities or other obligations and any certificates, receipts, warrants, or other instruments or documents representing rights to receive, purchase, or subscribe for the same or evidencing or representing any other rights or interest therein, or any similar property or assets that the Custodian has the facilities to clear and to service. Page -3- SEC - the Securities and Exchange Commission of the United States of America. SHARES - with respect to a Fund, the units of beneficial interest issued by the Trust on account of such Fund. TRUST - the business trust organized under the laws of Delaware which is an open-end management investment company registered under the Act. WRITTEN INSTRUCTIONS - communications in writing actually received by the Custodian from an Authorized Person. A communication in writing includes a communication by facsimile, telex or between electro-mechanical or electronic devices (where the use of such devices have been approved by resolution of the Trustee and the resolution is certified by an Officer and delivered to the Custodian). All written communications shall be directed to the Custodian, attention: Mutual Fund Custody Department. ARTICLE II APPOINTMENT; ACCEPTANCE; AND FURNISHING OF DOCUMENTS A. APPOINTMENT OF CUSTODIAN. The Trust hereby constitutes and appoints the Custodian as custodian of all Securities and cash owned by the Trust at any time during the term of this Agreement. B. ACCEPTANCE OF CUSTODIAN. The Custodian hereby accepts appointment as such custodian and agrees to perform the duties thereof as hereinafter set forth. C. DOCUMENTS TO BE FURNISHED. The following documents, including any amendments thereto, will be provided contemporaneously with the execution of the Agreement, to the Custodian by the Trust: 1. A copy of the Declaration of Trust of the Trust certified by the Secretary. Page -4- 2. A copy of the By-Laws of the Trust certified by the Secretary. 3. A copy of the resolution of the Board of Trustees of the Trust appointing the Custodian, certified by the Secretary. 4. A copy of the then current Prospectus. 5. A Certificate of the President and Secretary of the Trust setting forth the names and signatures of the current Officers of the Trust and other Authorized Persons. D. NOTICE OF APPOINTMENT OF DIVIDEND AND TRANSFER AGENT. The Trust agrees to notify the Custodian in writing of the appointment, termination or change in appointment of any Dividend and Transfer Agent. ARTICLE III RECEIPT OF TRUST ASSETS A. DELIVERY OF MONEYS. During the term of this Agreement, the Trust will deliver or cause to be delivered to the Custodian all moneys to be held by the Custodian for the account of any Fund. The Custodian shall be entitled to reverse any deposits made on any Fund's behalf where such deposits have been entered and moneys are not finally collected within 30 days of the making of such entry. B. DELIVERY OF SECURITIES. During the term of this Agreement, the Trust will deliver or cause to be delivered to the Custodian all Securities to be held by the Custodian for the account of any Fund. The Custodian will not have any duties or responsibilities with respect to such Securities until actually received by the Custodian. The Custodian is hereby authorized by the Trust, acting on behalf of the Fund, to actually deposit any assets of the Fund in the Book-Entry System or in a Depository, provided, however, that the Custodian shall always be accountable to the Trust for the assets of the Fund so deposited. Assets deposited in the Book-Entry System or Depository will be Page -5- represented in accounts which include only assets held by the Custodian for customers, including but not limited to accounts in which the Custodian acts in a fiduciary or representative capacity. C. PAYMENTS FOR SHARES. As and when received, the Custodian shall deposit to the account(s) of a Fund any and all payments for Shares of that Fund issued or sold from time to time as they are received from the Trust's distributor or Dividend and Transfer Agent or from the Trust itself. D. DUTIES UPON RECEIPT. The Custodian shall not be responsible for any Securities, moneys or other assets of any Fund until actually received by it. E. VALIDITY OF TITLE. The Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received or delivered by it pursuant to this Agreement. ARTICLE IV DISBURSEMENT OF TRUST ASSETS A. DECLARATION OF DIVIDENDS BY TRUST. The Trust shall furnish to the Custodian a copy of the resolution of the Board of Trustees of the Trust, certified by the Trust's Secretary, either (i) setting forth the date of the declaration of any dividend or distribution in respect of Shares of any Fund of the Trust, the date of payment thereof, the record date as of which the Fund shareholders entitled to payment shall be determined, the amount payable per share to Fund shareholders of record as of that date, and the total amount to be paid by the Dividend and Transfer Agent on the payment date, or (ii) authorizing the declaration of dividends and distributions in respect of Shares of a Fund on a daily basis and authorizing the Custodian to rely on Written Instructions setting forth the date of the declaration of any such dividend or distribution, the date of payment thereof, the record date as of which the Fund shareholders entitled to payment shall be determined, the amount payable per share to Fund shareholders of record as of that date, and the total amount to be paid by the Dividend and Transfer Agent on the payment date. Page -6- On the payment date specified in the resolution or Written Instructions described above, the Custodian shall segregate such amounts from moneys held for the account of the Fund so that they are available for such payment. B. SEGREGATION OF REDEMPTION PROCEEDS. Upon receipt of Proper Instructions so directing it, the Custodian shall segregate amounts necessary for the payment of redemption proceeds to be made by the Dividend and Transfer Agent from moneys held for the account of the Fund so that they are available for such payment. C. DISBURSEMENTS OF CUSTODIAN. Upon receipt of a Certificate directing payment and setting forth the name and address of the person to whom such payment is to be made, the amount of such payment, the name of the Fund from which payment is to be made, and the purpose for which payment is to be made, the Custodian shall disburse amounts as and when directed from the assets of that Fund. The Custodian is authorized to rely on such directions and shall be under no obligation to inquire as to the propriety of such directions. D. PAYMENT OF CUSTODIAN FEES. Upon receipt of Written Instructions directing payment, the Custodian shall disburse moneys from the assets of the Trust in payment of the Custodian's fees and expenses as provided in Article VIII hereof. ARTICLE V CUSTODY OF TRUST ASSETS A. SEPARATE ACCOUNTS FOR EACH FUND. As to each Fund, the Custodian shall open and maintain a separate bank account or accounts in the United States in the name of the Trust coupled with the name of such Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Agreement, and shall hold all cash received by it from or for the account of the Fund, other than cash maintained by the Fund in a bank account established and used by the Fund in accordance with Rule 17f-3 under the Act. Moneys held Page -7- by the Custodian on behalf of a Fund may be deposited by the Custodian to its credit as Custodian in the banking department of the Custodian. Such moneys shall be deposited by the Custodian in its capacity as such, and shall be withdrawable by the Custodian only in such capacity. B. SEGREGATION OF NON-CASH ASSETS. All Securities and non-cash property held by the Custodian for the account of a Fund (other than Securities maintained in a Depository or Book-entry System) shall be physically segregated from other Securities and non-cash property in the possession of the Custodian (including the Securities and non-cash property of the other Funds) and shall be identified as subject to this Agreement. C. SECURITIES IN BEARER AND REGISTERED FORM. All Securities held which are issued or issuable only in bearer form, shall be held by the Custodian in that form; all other Securities held for the Fund may be registered in the name of the Custodian, any sub-custodian appointed in accordance with this Agreement, or the nominee of any of them. The Trust agrees to furnish to the Custodian appropriate instruments to enable the Custodian to hold, or deliver in proper form for transfer, any Securities that it may hold for the account of any Fund and which may, from time to time, be registered in the name of a Fund. D. DUTIES OF CUSTODIAN AS TO SECURITIES. Unless otherwise instructed by the Trust, with respect to all Securities held for the Trust, the Custodian shall on a timely basis (concerning items 1 and 2 below, as defined in the Custodian's Standards of Service Guide, as amended from time to time, annexed hereto as Appendix D): 1.) Collect all income due and payable with respect to such Securities; 2.) Present for payment and collect amounts payable upon all Securities which may mature or be called, redeemed, or retired, or otherwise become payable; 3.) Surrender interim receipts or Securities in temporary form for Securities in definitive form; and Page -8- 4.) Execute, as Custodian, any necessary declarations or certificates of ownership under the Federal income tax laws or the laws or regulations of any other taxing authority, including any foreign taxing authority, now or hereafter in effect. E. CERTAIN ACTIONS UPON WRITTEN INSTRUCTIONS. Upon receipt of a Written Instructions and not otherwise, the Custodian shall: 1.) Execute and deliver to such persons as may be designated in such Written Instructions proxies, consents, authorizations, and any other instruments whereby the authority of the Trust as beneficial owner of any Securities may be exercised; 2.) Deliver any Securities in exchange for other Securities or cash issued or paid in connection with the liquidation, reorganization, refinancing, merger, consolidation, or recapitalization of any trust, or the exercise of any conversion privilege; 3.) Deliver any Securities to any protective committee, reorganization committee, or other person in connection with the reorganization, refinancing, merger, consolidation, recapitalization, or sale of assets of any trust, and receive and hold under the terms of this Agreement such certificates of deposit, interim receipts or other instruments or documents as may be issued to it to evidence such delivery; 4.) Make such transfers or exchanges of the assets of any Fund and take such other steps as shall be stated in the Written Instructions to be for the purpose of effectuating any duly authorized plan of liquidation, reorganization, merger, consolidation or recapitalization of the Trust; and Page -9- 5.) Deliver any Securities held for any Fund to the depository agent for tender or other similar offers. F. CUSTODIAN TO DELIVER PROXY MATERIALS. The Custodian shall promptly deliver to the Trust all notices, proxy material and executed but unvoted proxies pertaining to shareholder meetings of Securities held by any Fund. The Custodian shall not vote or authorize the voting of any Securities or give any consent, waiver or approval with respect thereto unless so directed by Written Instructions. G. CUSTODIAN TO DELIVER TENDER OFFER INFORMATION. The Custodian shall promptly deliver to the Trust all information received by the Custodian and pertaining to Securities held by any Fund with respect to tender or exchange offers, calls for redemption or purchase, or expiration of rights. If the Trust desires to take action with respect to any tender offer, exchange offer or other similar transaction, the Trust shall notify the Custodian at least five Business Days prior to the date on which the Custodian is to take such action. The Trust will provide or cause to be provided to the Custodian all relevant information for any Security which has unique put/option provisions at least five Business Days prior to the beginning date of the tender period. H. CUSTODIAN TO DELIVER SECURITY AND TRANSACTION INFORMATION. On each Business Day that the Federal Reserve Bank is open, the Custodian shall furnish the Trust with a detailed statement of monies held for the Fund under this Agreement and with confirmations and a summary of all transfers to or from the account of the Fund. At least monthly and from time to time, the Custodian shall furnish the Trust with a detailed statement of Securities held for the Fund under this Agreement. Where Securities are transferred to the account of the Fund without physical delivery, the Custodian shall also identify as belonging to the Fund a quantity of Securities in a fungible bulk of Securities registered in the name of the Custodian (or its nominee) or Page -10- shown on the Custodian's account on the books of the Book-Entry System or the Depository. With respect to information provided by this section, it shall not be necessary for the Custodian to provide notice as described by Article XI Section F. Notices to Trust; it shall be sufficient to communicate by such means as shall be mutually agreeable to the Trust and the Custodian. ARTICLE VI PURCHASE AND SALE OF SECURITIES A. PURCHASE OF SECURITIES. Promptly after each purchase of Securities by the Trust, the Trust shall deliver to the Custodian (i) with respect to each purchase of Securities which are not Money Market Securities, Written Instructions, and (ii) with respect to each purchase of Money Market Securities, Proper Instructions, specifying with respect to each such purchase the; 1.) name of the issuer and the title of the Securities, 2.) the number of shares, principal amount purchased (and accrued interest, if any) or other units purchased, 3.) date of purchase and settlement, 4.) purchase price per unit, 5.) total amount payable, 6.) name of the person from whom, or the broker through which, the purchase was made, 7.) the name of the person to whom such amount is payable, and 8.) the Fund for which the purchase was made. The Custodian shall, against receipt of Securities purchased by or for the Trust, pay out of the moneys held for the account of such Fund the total amount specified in the Written Instructions, or Oral Instructions, if applicable, to the person named therein. The Custodian shall not be under any obligation to pay out moneys to cover the cost of a purchase of Securities for a Fund, if in the relevant Fund custody account there is insufficient cash Page -11- available to the Fund for which such purchase was made. With respect to any repurchase agreement transaction for the Funds, the Custodian shall assure that the collateral reflected on the transaction advice is received by the Custodian. B. SALE OF SECURITIES. Promptly after each sale of Securities by a Fund, the Trust shall deliver to the Custodian (i) with respect to each sale of Securities which are not Money Market Securities, Written Instructions, and (ii) with respect to each sale of Money Market Securities, Proper Instructions, specifying with respect to each such sale the: 1.) name of the issuer and the title of the Securities, 2.) number of shares, principal amount sold (and accrued interest, if any) or other units sold, 3.) date of sale and settlement, 4.) sale price per unit, 5.) total amount receivable, 6.) name of the person to whom, or the broker through which, the sale was made, 7.) name of the person to whom such Securities are to be delivered, and 8.) Fund for which the sale was made. The Custodian shall deliver the Securities against receipt of the total amount specified in the Written Instructions, or Oral Instructions, if applicable. Notwithstanding any other provision of this Agreement, the Custodian, when properly instructed as provided herein to deliver Securities against payment, shall be entitled, if in accordance with generally accepted market practice, to deliver such Securities prior to actual receipt of final payment therefor. In any such case, the Fund for which the Securities were delivered shall bear the risk that final payment for the Securities may not be made or that the Securities may be returned or otherwise held or disposed of by or through the person to whom they were delivered, and the Custodian shall have no liability for any of the foregoing. C. DELIVERY VERSUS PAYMENT FOR PURCHASES AND SALES. Purchases and sales of Securities effected by the Custodian will be made on a delivery versus payment basis. The Custodian may, in its sole discretion, upon receipt of Written Instructions, elect to settle a purchase or sale transaction in some other manner, but only upon receipt of acceptable indemnification from the Fund. Page -12- D. PAYMENT ON SETTLEMENT DATE. On contractual settlement date, the account of the Fund will be charged for all purchased Securities settling on that day, regardless of whether or not delivery is made. Likewise, on contractual settlement date, proceeds from the sale of Securities settling that day will be credited to the account of the Fund, irrespective of delivery. Any such credit shall be conditioned upon actual receipt by Custodian of final payment and may be reversed if final payment is not actually received in full. E. SEGREGATED ACCOUNTS. The Custodian shall, upon receipt of Proper Instructions so directing it, establish and maintain a segregated account or accounts for and on behalf of a Fund. Cash and/or Securities may be transferred into such account or accounts for specific purposes, to-wit: 1.) in accordance with the provision of any agreement among the Trust, the Custodian, and a broker-dealer registered under the 1934 Act, and also a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of the Options Clearing Corporation and of any registered national securities exchange, the Commodity Futures Trading Commission, any registered contract market, or any similar organization or organizations requiring escrow or other similar arrangements in connection with transactions by the Fund; 2.) for purposes of segregating cash or Securities in connection with options purchased, sold, or written by the Fund or commodity futures contracts or options thereon purchased or sold by the Fund; 3.) for the purpose of compliance by the Fund with the procedures required for reverse repurchase agreements, firm commitment agreements, standby commitment agreements, and short sales by Act Release No. 10666, or any subsequent release or releases or rule of the SEC relating to the maintenance of segregated accounts by registered investment companies; Page -13- 4.) for the purpose of segregating collateral for loans of Securities made by the Fund; and 5.) for other proper corporate purposes, but only upon receipt of, in addition to Proper Instructions, a copy of a resolution of the Board of Trustees, certified by an Officer, setting forth the purposes of such segregated account. Each segregated account established hereunder shall be established and maintained for a single Fund only. All Proper Instructions relating to a segregated account shall specify the Fund involved. F. ADVANCES FOR SETTLEMENT. Except as otherwise may be agreed upon by the parties hereto, the Custodian shall not be required to comply with any Written Instructions to settle the purchase of any Securities on behalf of a Fund unless there is sufficient cash in the account(s) pertaining to such Fund at the time or to settle the sale of any Securities from such an account(s) unless such Securities are in deliverable form. Notwithstanding the foregoing, if the purchase price of such Securities exceeds the amount of cash in the account(s) at the time of such purchase, the Custodian may, in its sole discretion, advance the amount of the difference in order to settle the purchase of such Securities. The amount of any such advance shall be deemed a loan from the Custodian to the Trust payable on demand and bearing interest accruing from the date such loan is made up to but not including the date such loan is repaid at the rate per annum customarily charged by the Custodian on similar loans. Page -14- ARTICLE VII TRUST INDEBTEDNESS A. BORROWINGS. In connection with any borrowings by the Trust, the Trust will cause to be delivered to the Custodian by a bank or broker requiring Securities as collateral for such borrowings (including the Custodian if the borrowing is from the Custodian), a notice or undertaking in the form currently employed by such bank or broker setting forth the amount of collateral. The Trust shall promptly deliver to the Custodian Written Instructions specifying with respect to each such borrowing: (a) the name of the bank or broker, (b) the amount and terms of the borrowing, which may be set forth by incorporating by reference an attached promissory note duly endorsed by the Trust, or a loan agreement, (c) the date, and time if known, on which the loan is to be entered into, (d) the date on which the loan becomes due and payable, (e) the total amount payable to the Trust on the borrowing date, and (f) the description of the Securities securing the loan, including the name of the issuer, the title and the number of shares or other units or the principal amount. The Custodian shall deliver on the borrowing date specified in the Written Instructions the required collateral against the lender's delivery of the total loan amount then payable, provided that the same conforms to that which is described in the Written Instructions. The Custodian shall deliver, in the manner directed by the Trust, such Securities as additional collateral, as may be specified in Written Instructions, to secure further any transaction described in this Article VII. The Trust shall cause all Securities released from collateral status to be returned directly to the Custodian and the Custodian shall receive from time to time such return of collateral as may be tendered to it. The Custodian may, at the option of the lender, keep such collateral in its possession, subject to all rights therein given to the lender because of the loan. The Custodian may require such reasonable conditions regarding such collateral and its dealings with third-party lenders as it may deem appropriate. Page -15- B. ADVANCES. With respect to any advances of cash made by the Custodian to or for the benefit of a Fund for any purpose which results in the Fund incurring an overdraft at the end of any Business Day, such advance shall be repayable immediately upon demand made by the Custodian at any time. ARTICLE VIII CONCERNING THE CUSTODIAN A. LIMITATIONS ON LIABILITY OF CUSTODIAN. Except as otherwise provided herein, the Custodian shall not be liable for any loss or damage, including counsel fees, resulting from its action or omission to act or otherwise, except for any such loss or damage arising out of its own gross negligence or willful misconduct. The Trust, on behalf of the Fund and only from assets of the Fund (or insurance purchased by the Trust with respect to its liabilities on behalf of the Fund hereunder), shall defend, indemnify and hold harmless the Custodian and its directors, officers, employees and agents with respect to any loss, claim, liability or cost (including reasonable attorneys' fees) arising or alleged to arise from or relating to the Trust's duties hereunder or any other action or inaction of the Trust or its Trustees, officers, employees or agents, except such as may arise from the negligent action, omission, willful misconduct or breach of this Agreement by the Custodian, its directors, officers, employees or agents. The Custodian shall defend, indemnify and hold harmless the Trust and its trustees, officers, employees or agents with respect to any loss, claim, liability or cost (including reasonable attorneys' fees) arising or alleged to arise from or relating to the Custodian's duties as specifically set forth in this agreement with respect to the Fund hereunder or any other action or inaction of the Custodian or its directors, officers, employees, agents, nominees, or Sub-Custodians as Page -16- to the Fund, except such as may arise from the negligent action, omission or willful misconduct of the Trust, its trustees, officers, employees, or agents. The Custodian may, with respect to questions of law apply for and obtain the advice and opinion of counsel to the Trust at the expense of the Fund, or of its own counsel at its own expense, and shall be fully protected with respect to anything done or omitted by it in good faith in conformity with the advice or opinion of counsel to the Trust, and shall be similarly protected with respect to anything done or omitted by it in good faith in conformity with advice or opinion of its counsel, unless counsel to the Fund shall, within a reasonable time after being notified of legal advice received by the Custodian, have a differing interpretation of such question of law. The Custodian shall be liable to the Trust for any proximate loss or damage resulting from the use of the Book-Entry System or any Depository arising by reason of any negligence, misfeasance or misconduct on the part of the Custodian or any of its employees, agents, nominees or Sub-Custodians, but not for any special, incidental, consequential, or punitive damages; provided, however, that nothing contained herein shall preclude recovery by the Trust, on behalf of the Fund, of principal and of interest to the date of recovery on Securities incorrectly omitted from the Fund's account or penalties imposed on the Trust, in connection with the Fund, for any failures to deliver Securities. In any case in which one party hereto may be asked to indemnify the other or hold the other harmless, the party from whom indemnification is sought (the "Indemnifying Party") shall be advised of all pertinent facts concerning the situation in question, and the party claiming a right to indemnification (the "Indemnified Party") will use reasonable care to identify and notify the Indemnifying Party promptly concerning any situation which presents or appears to present a claim for indemnification against the Indemnifying Party. The Indemnifying Party shall have the option to defend the Indemnified Party against any claim which may be the subject of indemnification, and in the event the Indemnifying Party so elects, such defense shall be conducted by counsel chosen by the Indemnifying Party and satisfactory to the Indemnified Party and the Indemnifying Party will so Page -17- notify the Indemnified Party and thereupon such Indemnifying Party shall take over the complete defense of the claim and the Indemnifying Party shall sustain no further legal or other expenses in such situation for which indemnification has been sought under this paragraph, except the expenses of any additional counsel retained by the Indemnified Party. In no case shall any party claiming the right to indemnification confess any claim or make any compromise in any case in which the other party has been asked to indemnify such party (unless such confession or compromise is made with such other party's prior written consent). The provisions of this section VIII. A. shall survive the termination of this Agreement. B. ACTIONS NOT REQUIRED BY CUSTODIAN. Without limiting the generality of the foregoing, the Custodian, acting in the capacity of Custodian hereunder, shall be under no obligation to inquire into, and shall not be liable for: 1.) The validity of the issue of any Securities purchased by or for the account of any Fund, the legality of the purchase thereof, or the propriety of the amount paid therefor; 2.) The legality of the sale of any Securities by or for the account of any Fund, or the propriety of the amount for which the same are sold; 3.) The legality of the issue or sale of any Shares of any Fund, or the sufficiency of the amount to be received therefor; 4.) The legality of the redemption of any Shares of any Fund, or the propriety of the amount to be paid therefor; 5.) The legality of the declaration or payment of any dividend by the Trust in respect of Shares of any Fund; Page -18- 6.) The legality of any borrowing by the Trust on behalf of the Trust or any Fund, using Securities as collateral; 7.) Whether the Trust or a Fund is in compliance with the 1940 Act, the regulations thereunder, the provisions of the Trust's charter documents or by-laws, or its investment objectives and policies as then in effect. C. NO DUTY TO COLLECT AMOUNTS DUE FROM DIVIDEND AND TRANSFER AGENT. The Custodian shall not be under any duty or obligation to take action to effect collection of any amount due to the Trust from any Dividend and Transfer Agent of the Trust nor to take any action to effect payment or distribution by any Dividend and Transfer Agent of the Trust of any amount paid by the Custodian to any Dividend and Transfer Agent of the Trust in accordance with this Agreement. D. NO ENFORCEMENT ACTIONS. Notwithstanding Section D of Article V, the Custodian shall not be under any duty or obligation to take action, by legal means or otherwise, to effect collection of any amount, if the Securities upon which such amount is payable are in default, or if payment is refused after due demand or presentation, unless and until (i) it shall be directed to take such action by Written Instructions and (ii) it shall be assured to its satisfaction (including prepayment thereof) of reimbursement of its costs and expenses in connection with any such action. E. AUTHORITY TO USE AGENTS AND SUB-CUSTODIANS. The Trust acknowledges and hereby authorizes the Custodian to hold Securities through its various agents described in Appendix C annexed hereto. The Fund hereby represents that such authorization has been duly approved by the Board of Trustees of the Trust as required by the Act. In addition, the Trust acknowledges that the Custodian may appoint one or more financial institutions, as agent or agents or as sub-custodian or sub-custodians, including, but not limited to, banking institutions located in foreign countries, for the purpose of holding Securities and moneys at any time owned by the Fund. The Custodian shall not be relieved of any obligation or liability under this Agreement in connection with the appointment or activities of such agents or sub-custodians. Any such agent or sub-custodian shall be qualified to serve as such for assets of investment companies Page -19- registered under the Act. The Funds shall reimburse the Custodian for all costs incurred by the Custodian in connection with opening accounts with any such agents or sub-custodians. Upon request, the Custodian shall promptly forward to the Trust any documents it receives from any agent or sub-custodian appointed hereunder which may assist trustees of registered investment companies to fulfill their responsibilities under Rule 17f-5 of the Act. F. NO DUTY TO SUPERVISE INVESTMENTS. The Custodian shall not be under any duty or obligation to ascertain whether any Securities at any time delivered to or held by it for the account of the Trust are such as properly may be held by the Trust under the provisions of the Articles of Incorporation and the Trust's By-Laws. G. ALL RECORDS CONFIDENTIAL. The Custodian shall treat all records and other information relating to the Trust and the assets of all Funds as confidential and shall not disclose any such records or information to any other person unless (i) the Trust shall have consented thereto in writing or (ii) such disclosure is required by law. H. COMPENSATION OF CUSTODIAN. The Custodian shall be entitled to receive and the Trust agrees to pay to the Custodian such compensation as shall be determined pursuant to Appendix E attached hereto, or as shall be determined pursuant to amendments to Appendix E. The Custodian shall be entitled to charge against any money held by it for the account of any Fund, the amount of any of its fees, any loss, damage, liability or expense, including counsel fees. The expenses which the Custodian may charge against the account of a Fund include, but are not limited to, the expenses of agents or Sub-Custodians incurred in settling transactions involving the purchase and sale of Securities of the Fund. Page -20- I. RELIANCE UPON INSTRUCTIONS. The Custodian shall be entitled to rely upon any Proper Instructions if such reliance is made in good faith. The Trust agrees to forward to the Custodian Written Instructions confirming Oral Instructions in such a manner so that such Written Instructions are received by the Custodian, whether by hand delivery, telex, facsimile or otherwise, on the same Business Day on which such Oral Instructions were given. The Trust agrees that the failure of the Custodian to receive such confirming instructions shall in no way affect the validity of the transactions or enforceability of the transactions hereby authorized by the Trust. The Trust agrees that the Custodian shall incur no liability to the Trust for acting upon Oral Instructions given to the Custodian hereunder concerning such transactions. J. BOOKS AND RECORDS. The Custodian will (i) set up and maintain proper books of account and complete records of all transactions in the accounts maintained by the Custodian hereunder in such manner as will meet the obligations of the Fund under the Act, with particular attention to Section 31 thereof and Rules 3la-1 and 3la-2 thereunder and those records are the property of the Trust, and (ii) preserve for the periods prescribed by applicable Federal statute or regulation all records required to be so preserved. All such books and records shall be the property of the Trust, and shall be available, upon request, for inspection by duly authorized officers, employees or agents of the Trust and employees of the SEC. K. INTERNAL ACCOUNTING CONTROL SYSTEMS. The Custodian shall send to the Trust any report received on the systems of internal accounting control of the Custodian, or its agents or sub-custodians, as the Trust may reasonably request from time to time. L. NO MANAGEMENT OF ASSETS BY CUSTODIAN. The Custodian performs only the services of a custodian and shall have no responsibility for the management, Page -21- investment or reinvestment of the Securities or other assets from time to time owned by any Fund. The Custodian is not a selling agent for Shares of any Fund and performance of its duties as custodian shall not be deemed to be a recommendation to any Fund's depositors or others of Shares of the Fund as an investment. The Custodian shall have no duties or obligations whatsoever except such duties and obligations as are specifically set forth in this Agreement, and no covenant or obligation shall be implied in this Agreement against the Custodian. M. ASSISTANCE TO TRUST. The Custodian shall take all reasonable action, that the Trust may from time to time request, to assist the Trust in obtaining favorable opinions from the Trust's independent accountants, with respect to the Custodian's activities hereunder, in connection with the preparation of the Fund's Form N-IA, Form N-SAR, or other annual reports to the SEC. N. GRANT OF SECURITY INTEREST. The Trust hereby pledges to and grants the Custodian a security interest in the assets of any Fund to secure the payment of any liabilities of the Trust to the Custodian, whether acting in its capacity as Custodian or otherwise, or on account of money borrowed from the Custodian. This pledge is in addition to any other pledge of collateral by the Trust to the Custodian. ARTICLE IX INITIAL TERM; TERMINATION A. INITIAL TERM. This Agreement shall become effective as of its execution and shall continue in full force and effect until terminated as hereinafter provided. B. TERMINATION. Either party hereto may terminate this Agreement after the Initial Term for any reason by giving to the other party a notice in writing specifying the date of such termination, which shall be not less than ninety (90) days after the date of giving of such notice. If such notice is given by the Trust, it shall be accompanied by a copy of a resolution of the Board of Trustees of the Trust, certified by the Secretary of the Trust, electing to terminate this Agreement and designating a successor custodian or custodians each of which shall be a bank or trust company having not less than $100,000,000 aggregate capital, surplus, and undivided profits. In the event such notice is given by the Custodian, the Trust shall, on or before the termination date, deliver to the Custodian a copy of a resolution of the Board Page -22- of Trustees of the Trust, certified by the Secretary, designating a successor custodian or custodians to act on behalf of the Trust. In the absence of such designation by the Trust, the Custodian may designate a successor custodian which shall be a bank or trust company having not less than $100,000,000 aggregate capital, surplus, and undivided profits. Upon the date set forth in such notice this Agreement shall terminate, and the Custodian, provided that it has received a notice of acceptance by the successor custodian, shall deliver, on that date, directly to the successor custodian all Securities and moneys then owned by the Fund and held by it as Custodian. Upon termination of this Agreement, the Trust shall pay to the Custodian on behalf of the Trust such compensation as may be due as of the date of such termination. The Trust agrees on behalf of the Trust that the Custodian shall be reimbursed for its reasonable costs in connection with the termination of this Agreement. C. FAILURE TO DESIGNATE SUCCESSOR CUSTODIAN. If a successor custodian is not designated by the Trust, or by the Custodian in accordance with the preceding paragraph, or the designated successor cannot or will not serve, the Trust shall, upon the delivery by the Custodian to the Trust of all Securities (other than Securities held in the Book-Entry System which cannot be delivered to the Trust) and moneys then owned by the Trust, be deemed to be the custodian for the Trust, and the Custodian shall thereby be relieved of all duties and responsibilities pursuant to this Agreement, other than the duty with respect to Securities held in the Book-Entry System, which cannot be delivered to the Trust, which shall be held by the Custodian in accordance with this Agreement. Page -23- ARTICLE X FORCE MAJEURE Neither the Custodian nor the Trust shall be liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fires; floods; wars; civil or military disturbances; sabotage; strikes; epidemics; riots; power failures; computer failure and any such circumstances beyond its reasonable control as may cause interruption, loss or malfunction of utility, transportation, computer (hardware or software) or telephone communication service; accidents; labor disputes; acts of civil or military authority; governmental actions; or inability to obtain labor, material, equipment or transportation; provided, however, that the Custodian, in the event of a failure or delay, shall use its best efforts to ameliorate the effects of any such failure or delay. ARTICLE XI MISCELLANEOUS A. DESIGNATION OF AUTHORIZED PERSONS. Appendix A sets forth the names and the signatures of all Authorized Persons as of this date, as certified by the Secretary of the Trust. The Trust agrees to furnish to the Custodian a new Appendix A in form similar to the attached Appendix A, if any present Authorized Person ceases to be an Authorized Person or if any other or additional Authorized Persons are elected or appointed. Until such new Appendix A shall be received, the Custodian shall be fully protected in acting under the provisions of this Agreement upon Oral Instructions or signatures of the then current Authorized Persons as set forth in the last delivered Appendix A. B. LIMITATION OF PERSONAL LIABILITY. No recourse under any obligation of this Agreement or for any claim based thereon shall be had against any organizer, shareholder, officer, trustee, past, present or future as such, of the Trust or of any predecessor or successor, either directly or through the Trust or any such predecessor or successor, whether by virtue of any constitution, statute or rule of law or equity, or by the enforcement of any Page -24- assessment or penalty or otherwise; it being expressly agreed and understood that this Agreement and the obligations thereunder are enforceable solely against the Trust, and that no such personal liability whatever shall attach to, or is or shall be incurred by, the organizers, shareholders, officers, or trustees of the Trust or of any predecessor or successor, or any of them as such. To the extent that any such liability exists, it is hereby expressly waived and released by the Custodian as a condition of, and as a consideration for, the execution of this Agreement. C. AUTHORIZATION BY BOARD. The obligations set forth in this Agreement as having been made by the Trust have been made by the Board of Trustees, acting as such Trustees for and on behalf of the Trust, pursuant to the authority vested in them under the laws of the State of Delaware, the Declaration of Trust and the By-Laws of the Trust. This Agreement has been executed by Officers of the Trust as officers, and not individually, and the obligations contained herein are not binding upon any of the Trustees, Officers, agents or holders of shares, personally, but bind only the Trust and then only to the extent of the assets of the Trust. D. CUSTODIAN'S CONSENT TO USE OF ITS NAME. The Trust shall obtain the Custodian's consent prior to the publication and/or dissemination or distribution, of the Prospectus and any other documents (including advertising material) specifically mentioning the Custodian (other than merely by name and address). E. NOTICES TO CUSTODIAN. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Custodian, shall be sufficiently given if addressed to the Custodian and mailed or delivered to it at its offices at Firstar Bank Center, 425 Walnut Street, M. L. 6118, Cincinnati, Ohio 45202, attention Mutual Fund Custody Department, or at such other place as the Custodian may from time to time designate in writing. Page -25- F. NOTICES TO TRUST. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Trust shall be sufficiently given when delivered to the Trust or on the second Business Day following the time such notice is deposited in the U.S. mail postage prepaid and addressed to the Trust at its office at 475 Milan Drive, Suite 103, San Jose, California 95134-2453 or at such other place as the Trust may from time to time designate in writing. G. AMENDMENTS IN WRITING. This Agreement, with the exception of the Appendices, may not be amended or modified in any manner except by a written agreement executed by both parties with the same formality as this Agreement, and authorized and approved by a resolution of the Board of Trustees of the Trust. H. SUCCESSORS AND ASSIGNS. This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Trust or by the Custodian, and no attempted assignment by the Trust or the Custodian shall be effective without the written consent of the other party hereto. I. GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Ohio. J. JURISDICTION. Any legal action, suit or proceeding to be instituted by either party with respect to this Agreement shall be brought by such party exclusively in the courts of the State of Ohio or in the courts of the United States for the Southern District of Ohio, and each party, by its execution of this Agreement, irrevocably (i) submits to such jurisdiction and (ii) consents to the service of any process or pleadings by first class U.S. mail, postage prepaid and return receipt requested, or by any other means from time to time authorized by the laws of such jurisdiction. K. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but such counterparts shall, together, constitute only one instrument. Page -26- L. HEADINGS. The headings of paragraphs in this Agreement are for convenience of reference only and shall not affect the meaning or construction of any provision of this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective Officers, thereunto duly authorized as of the day and year first above written. WITNESS: TRUST: THE BERKSHIRE FUNDS /s/ Ronald G. Seger By: /s/ Malcolm R. Fobes III - - ------------------- --------------------------- Ronald G. Seger Malcolm R. Fobes III Secretary Chairman WITNESS: CUSTODIAN: FIRSTAR BANK, N.A. By: /s/ Marsha A. Croxton - - ------------------- ------------------------ Marsha A. Croxton Senior Trust Officer Page -27- APPENDIX A AUTHORIZED PERSONS SPECIMEN SIGNATURES Chairman: Malcolm R. Fobes III /s/ Malcolm R. Fobes III -------------------- ----------------------- President: -------------------- ----------------------- Vice President: -------------------- ----------------------- Secretary: Ronald G. Seger /s/ Ronald G. Seger -------------------- ----------------------- Assistant Secretary: -------------------- ----------------------- Treasurer: -------------------- ----------------------- Assistant Treasurer: -------------------- ----------------------- Adviser Employees: -------------------- ----------------------- Transfer Agent/Fund Accountant Employees: -------------------- ----------------------- -------------------- ----------------------- -------------------- ----------------------- -------------------- ----------------------- * Authority restricted; does not include: ----------------------------- Page -28- APPENDIX B SERIES OF THE TRUST BERKSHIRE FOCUS FUND BERKSHIRE TECHNOLOGY FUND Page -29- APPENDIX C AGENTS OF THE CUSTODIAN The following agents are employed currently by Firstar Bank, N.A. for securities processing and control ... The Depository Trust Company (New York) 7 Hanover Square New York, NY 10004 The Federal Reserve Bank Cincinnati and Cleveland Branches Bank of New York 1 Wall Street New York, NY 10286 (For Foreign Securities and certain non-DTC eligible Securities) Page -30- APPENDIX D FIRSTAR INSTITUTIONAL CUSTODY SERVICES STANDARDS OF SERVICE GUIDE Firstar Bank, N.A. is committed to providing superior quality service to all customers and their agents at all times. We have compiled this guide as a tool for our clients to determine our standards for the processing of security settlements, payment collection, and capital change transactions. Deadlines recited in this guide represent the times required for Firstar Bank to guarantee processing. Failure to meet these deadlines will result in settlement at our client's risk. In all cases, Firstar Bank will make every effort to complete all processing on a timely basis. Firstar Bank is a direct participant of the Depository Trust Company, a direct member of the Federal Reserve Bank of Cleveland, and utilizes the Bankers Trust Company as its agent for ineligible and foreign securities. For corporate reorganizations, Firstar Bank utilizes SEI's Reorg Source, Financial Information, Inc., XCITEK, DTC Important Notices, and the WALL STREET JOURNAL, For bond calls and mandatory puts, Firstar Bank utilizes SEI's Bond Source, Kenny Information Systems, Standard & Poor's Corporation, and DTC Important Notices. Firstar Bank will not notify clients of optional put opportunities. Any securities delivered free to Firstar Bank or its agents must be received three (3) business days prior to any payment or settlement in order for the Firstar Bank standards of service to apply. Should you have any questions regarding the information contained in this guide, please feel free to contact your account representative. The information contained in this Standards of Service Guide is subject to change. Should any changes be made Firstar Bank will provide you with an updated copy of its Standards of Service Guide.
FIRSTAR BANK SECURITY SETTLEMENT STANDARDS - - ------------------------------------------------------------------------------- TRANSACTION TYPE INSTRUCTIONS DEADLINES* DELIVERY INSTRUCTIONS DTC 1:30 P.M. on Settlement Date DTC Participant #2803 Agent Bank ID 27895 Institutional # __________ For Account # __________ Federal Reserve Book Entry 12:30 P.M. on Settlement Date Federal Reserve Bank of Cinti/Trust for Firstar Bank, N.A. ABA# 042000013 For Account # __________ Federal Reserve Book Entry 1:00 P.M. on Settlement Date Federal Reserve Bank of Cinti/Spec (Repurchase Agreement for Firstar Bank, N.A. ABA# 042000013 Collateral Only) For Account # __________ PTC Securities 12:00 P.M. on Settlement Date PTC For Account BYORK (GNMA Book Entry) Firstar Bank/117612 Physical Securities 9:30 A.M. EST on Settlement Date Bank of New York (for Deliveries, by 4:00 P.M. One Wall Street-3rd Floor - Window A on Settlement Date minus 1) New York, NY 10286 For account of Firstar Bank Cust#117612 Attn: Donald Hoover CEDEL/EURO-CLEAR 11:00 A.M. on Settlement Date Cedel a/c 55021 minus 2 FFC: a/c 387000 Firstar Bank/Global Omnibus Cash Wire Transfer 3:00 P.M. Firstar Bank, N.A. Cinti/Trust ABA# 042000013 Credit Account #9901877 Further Credit to __________ Account # __________
*All times listed are Eastern Standard Time. FIRSTAR BANK PAYMENT STANDARDS SECURITY TYPE INCOME PRINCIPAL Equities Payable Date Municipal Bonds* Payable Date Payable Date Corporate Bonds* Payable Date Payable Date Federal Reserve Bank Book Entry* Payable Date Payable Date PTC GNMA's (P&I) Payable Date + 1 Payable Date + 1 CMOs* DTC Payable Date + 1 Payable Date + 1 Bankers Trust Payable Date + 1 Payable Date + 1 SBA Loan Certificates When Received When Received Unit Investment Trust Payable Date Payable Date Certificates* Certificates of Deposit* Payable Date + 1 Payable Date + 1 Limited Partnerships When Received When Received Foreign Securities When Received When Received *Variable Rate Securities Federal Reserve Bank Book Entry Payable Date Payable Date DTC Payable Date + 1 Payable Date + 1 Bankers Trust Payable Date + 1 Payable Date + 1 NOTE: If a payable date falls on a weekend or bank holiday, payment will be made on the immediately following business day.
FIRSTAR BANK CORPORATE REORGANIZATION STANDARDS TYPE OF ACTION NOTIFICATION TO CLIENT DEADLINE FOR CLIENT TRANSACTION INSTRUCTIONS TO FIRSTAR BANK POSTING Rights, Warrants, Later of 10 business days prior 5 business days prior to Upon receipt and Optional Mergers to expiration or receipt of notice expiration Mandatory Puts with Later of 10 business days prior 5 business days prior to Upon receipt Option to Retain to expiration or receipt of notice expiration Class Actions 10 business days prior to 5 business days prior to Upon receipt expiration date expiration Voluntary Tenders, Later of 10 business days prior 5 business days prior to Upon receipt Exchanges, to expiration or receipt of notice expiration and Conversions Mandatory Puts, Defaults, At posting of funds or securities None Upon receipt Liquidations, Bankruptcies, received Stock Splits, Mandatory Exchanges Full and Partial Calls Later of 10 business days prior None Upon receipt to expiration or receipt of notice
NOTE: Fractional shares/par amounts resulting from any of the above will be sold. ADMINISTRATION AGREEMENT THIS ADMINISTRATION AGREEMENT ("Agreement"), is made and entered into this 19th day of December, 1999, by and between The Berkshire Funds, a Delaware business trust (the "Trust"), and Berkshire Capital Holdings, Inc., a California corporation (the "Administrator"). W I T N E S S E T H: WHEREAS, the Trust is engaged in business as a non-diversified open-end management investment company and is registered as such under the Investment Company Act of 1940, as amended (the "Act"); and WHEREAS, the Administrator is engaged in the business of rendering administrative and supervisory services to investment companies; and WHEREAS, the Trust desires to retain the Administrator to render supervisory and corporate administrative services to the Berkshire Focus Fund (the "Fund") in the manner and on the terms hereinafter set forth; NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. EMPLOYMENT OF THE ADMINISTRATOR. The Trust hereby employs the Administrator to administer the affairs of the Fund subject to the direction of the Board of Trustees and the officers of the Trust, for the period and on the terms hereinafter set forth. The Administrator hereby accepts such employment and agrees during such period to render the services and to assume the obligations herein set forth for the compensation herein provided. The Administrator shall devote such time as is necessary to carry out and shall at all times faithfully, with diligence and to the best of its ability, perform all of the duties required of it by the Fund hereunder. 2. OBLIGATIONS OF THE ADMINISTRATOR. The Administrator shall, at its expense, establish and maintain separate books of account and other records reasonably appropriate for the operation of the business of the Fund, including such entries and supporting documents as may be necessary or appropriate for the purpose of showing all the transactions made or committed on behalf of the Fund, and shall supervise all accounting procedures and audits. All books and records shall be maintained in such form and detail as may be required by applicable law. The Administrator shall oversee the maintenance of all books and records with respect to the Fund's securities transactions and the Fund's book of account in accordance with all applicable federal and state laws and regulations. The Administrator, at its expense, shall supply the Board of Trustees and officers of the Trust with all statistical information and reports reasonably required by it and reasonably available to the Administrator and furnish the Fund with office facilities, including space, furniture and equipment and all personnel reasonably necessary for the operation of the Fund. In compliance with the requirements of Rule 31a-3 under the Act, the Administrator hereby agrees that any records which it maintains for the Fund are the property of the Fund and further agrees to surrender promptly to the Fund any of such records upon the Fund's request. The Administrator further agrees to arrange for the preservation of the records required to be maintained by Rule 31a-1 under the Act for the periods prescribed by Rule 31a-2 under the Act. The Administrator covenants and agrees that it will maintain, or will otherwise have available to it, facilities and staff, including managerial, administrative and technical, as shall be necessary and adequate, in all material respects, to perform properly its obligations hereunder. 3. EXPENSES OF THE FUND. The Administrator assumes and shall pay for maintaining its staff and personnel, and shall at its own expense provide the equipment, office space and facilities necessary to perform its obligations under this Agreement. In addition, the Administrator assumes and shall pay all ordinary expenses of the Fund, including, without limitation: (a) organizational costs, (b) compensation of the Investment Adviser's personnel and payment of other expenses in connection with provision of portfolio management services, (c) compensation of any of the Trust's trustees, officers or employees who are not interested persons of the Investment Adviser or its affiliates, (d) fees and expenses of registering the Fund's shares under the federal securities laws and of qualifying its shares under applicable state Blue Sky laws, including expenses attendant upon renewing such registrations and qualifications, (e) insurance premiums, (f) fidelity bonds, (g) accounting and bookkeeping costs and expenses necessary to maintain the Fund's books and records, (h) outside auditing and ordinary legal expenses, (i) all costs associated with shareholders meetings and the preparation and dissemination of proxy solicitation materials, (j) costs of printing and distribution of the Fund's Prospectus and other shareholder information to existing shareholders, (k) charges, if any, of custodian and dividend disbursing agent's fees, (l) industry association fees, and (m) costs of independent pricing services and calculation of daily net asset value. The Administrator may, at its discretion, assume any additional expenses ordinarily assumed by the Fund when it determines that such action is in the best interest of the shareholders. Any extraordinary and non-recurring expenses shall be paid by the Fund. 4. COMPENSATION. As compensation for the services rendered, the facilities furnished and the expenses assumed by the Administrator, the Fund shall pay to the Administrator, in arrears, within ten days after the end of each calendar month, a fee, accrued each calendar day (including weekends and holidays) at a rate of 0.50% per annum of the Fund's average daily net assets up to $50 million, 0.45% of such assets from $50 million to $200 million, 0.40% of such assets from $200 million to $500 million, 0.35% of such assets from $500 million to $1 billion, and 0.30% of such assets in excess of $1 billion for such month as determined and computed in accordance with the description of the method of determination of net asset value contained in the Fund's Prospectus and Statement of Additional Information. 5. EXPENSE LIMITATION. If, in any fiscal year, the aggregate expenses of the Fund (including advisory, administrative and transfer agency fees, but excluding interest, local, state and federal taxes), exceed the expense limitations of any state having jurisdiction over the Fund, then the fee paid to the Administrator hereunder will be reduced pro rata (but not below zero) to the extent required by such expense limitation. The Administrator will bear its pro rata share of any such fee reduction based on the percentage that the Administrator's fee bears to the total administrative and advisory fees paid by the Fund to the Administrator and to the investment adviser of the Fund, for the month and year in which this Agreement becomes effective or terminates, there shall be an appropriate proration of said fee reduction based on the number of days that the Agreement is in effect during such month and year, respectively. 6. INSPECTION OF BOOKS AND RECORDS. Manager shall, upon reasonable notice, permit the Fund and its duly authorized representatives to inspect and to audit, for any purposes whatsoever, all of the books of account, documents, records, papers and files in the custody or possession of the Administrator relating in any manner to the business of the Fund. All expenses involved in such audit or inspection will be borne by the Fund. 7. INDEPENDENT CONTRACTOR. The Administrator is for all purposes hereunder an independent contractor, free from control, direction or supervision of the Trust and any persons engaged by the Administrator in the performance of the Administrator's duties hereunder are solely the employees or agents of the Administrator. The parties hereto intend and contemplate that their relationship shall not be construed, nor shall any provision of this Agreement be interpreted, so as to create a partnership or joint venture between them or their respective successors in interest and, except as expressly provided or authorized, neither party shall have the authority to act for, represent or bind the other or otherwise be deemed an agent of the other. 8. ACTIVITIES OF THE ADMINISTRATOR. The services of the Administrator to the Fund hereunder are not to be deemed exclusive and the Administrator shall be free to render similar services to others. Subject to, and in accordance with the Declaration of Trust and By-Laws of the Trust and Section 10(a) of the Act, it is understood that trustees, officers, agents and beneficial holders of the Trust are or may be "interested persons" (as defined in the Act) of the Administrator of its affiliates, and that directors, officers, agents or shareholders of the Administrator of its affiliates are or may be "interested persons" of the Trust as beneficial holders or otherwise. 9. LIMITATION OF LIABILITY. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of the Administrator, the Administrator shall not be liable to the Fund or to any beneficial holder of the Fund for any act or omission in the course of, or in connection with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. 10. TERM. This Agreement shall become effective on the date hereof, and shall continue in effect for one year and from year to year thereafter only so long as specifically approved annually by the Trust's Board of Trustees, including a majority of the Trustees who are not parties to the Agreement or "interested persons" (as defined in the Act) of any such party cast in person at a meeting called for the purpose of voting on such approval. 11. TERMINATION. This Agreement may be terminated at any time without the payment of any penalty (i) by the Fund either by vote of the Board of Trustees of the Trust or by vote of a majority of the outstanding voting securities of the Fund, on 60 days written notice to the Administrator, or (ii) by the Administrator on 60 days written notice to the Fund. 12. AMENDMENTS. This Agreement may be amended by the parties only if such amendment is specifically approved by the Board of Trustees of the Trust, including a majority of those trustees of the Trust who are not parties to this Agreement or interested persons of any such party cast in person at a meeting called for the purpose of voting on such approval. 13. NOTICES. Any notice required or desired to be given hereunder shall be in writing and shall be considered effective (i) when delivered, if by personal delivery, (ii) upon receipt, if sent by FAX, which FAX has been telephonically confirmed, between the hours of 9:00 a.m. and 5:00 p.m. local time of the recipient on a business day, or if not, at 9:00 a.m., local time on the next business day, or (iii) upon the earlier of actual or first attempted delivery, if mailed, postage prepaid, addressed as follows: If to the Administrator: Berkshire Capital Holdings, Inc. 475 Milan Drive, Suite #103 San Jose, California 95134-2453 FAX No.: (408) 562-6501 Telephone No.: (408) 526-0707 If to the Trust: The Berkshire Funds 475 Milan Drive, Suite #103 San Jose, California 95134-2453 FAX No.: (408) 562-6501 Telephone No.: (408) 526-0707 or to such other address as the party shall have furnished in writing in accordance with the provisions of this Section 13. 14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof, and supersedes all prior negotiations or agreements, whether written or oral. 15. INUREMENT. This Agreement shall inure to the benefit of and be binding upon the Fund, the Administrator, and their respective successors, transferees and assigns. 16. Assignment. Except as otherwise expressly provided herein, the rights and obligations of the parties pursuant to this Agreement may not be assigned without the express written consent of the other party. 17. SEVERABILITY. If any provision of this Agreement shall be held, declared or pronounced void, voidable, invalid, unenforceable or inoperative for any reason by any court of competent jurisdiction, such holding, declaration or pronouncement shall not adversely affect any other provision of this Agreement, and this Agreement shall otherwise remain in full force and effect and be enforced in accordance with its terms, including in a manner that may be reasonably required in order to render any provision that has been held, declared or pronounced void, voidable, invalid, unenforceable or inoperative to become valid, enforceable and operative. 18. COUNTERPARTS. This Agreement shall be executed in counterparts, in which case all such counterparts shall constitute one and the same agreement. 19. GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the laws of the State of California. 20. ATTORNEYS' FEES. In the event any proceeding is brought by one party against the other to enforce or for the breach of any of the provisions of this Agreement, the prevailing party shall be entitled in such proceeding and in any appeal therefrom to recover reasonable attorneys' fees, together with the costs of such proceeding therein incurred. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date first written above. ATTEST: THE BERKSHIRE FUNDS By: /s/ Ronald G. Seger By: /s/ Malcolm R. Fobes III ------------------- ------------------------ Ronald G. Seger Malcolm R. Fobes III Secretary President ATTEST: BERKSHIRE CAPITAL HOLDINGS, INC. By: /s/ Ronald G. Seger By: /s/ Malcolm R. Fobes III ------------------- ------------------------ Ronald G. Seger Malcolm R. Fobes III Secretary Chairman & CEO ADMINISTRATION AGREEMENT THIS ADMINISTRATION AGREEMENT ("Agreement"), is made and entered into this 19th day of December, 1999, by and between The Berkshire Funds, a Delaware business trust (the "Trust"), and Berkshire Capital Holdings, Inc., a California corporation (the "Administrator"). W I T N E S S E T H: WHEREAS, the Trust is engaged in business as a non-diversified open-end management investment company and is registered as such under the Investment Company Act of 1940, as amended (the "Act"); and WHEREAS, the Administrator is engaged in the business of rendering administrative and supervisory services to investment companies; and WHEREAS, the Trust desires to retain the Administrator to render supervisory and corporate administrative services to the Berkshire Technology Fund (the "Fund") in the manner and on the terms hereinafter set forth; NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. EMPLOYMENT OF THE ADMINISTRATOR. The Trust hereby employs the Administrator to administer the affairs of the Fund subject to the direction of the Board of Trustees and the officers of the Trust, for the period and on the terms hereinafter set forth. The Administrator hereby accepts such employment and agrees during such period to render the services and to assume the obligations herein set forth for the compensation herein provided. The Administrator shall devote such time as is necessary to carry out and shall at all times faithfully, with diligence and to the best of its ability, perform all of the duties required of it by the Fund hereunder. 2. OBLIGATIONS OF THE ADMINISTRATOR. The Administrator shall, at its expense, establish and maintain separate books of account and other records reasonably appropriate for the operation of the business of the Fund, including such entries and supporting documents as may be necessary or appropriate for the purpose of showing all the transactions made or committed on behalf of the Fund, and shall supervise all accounting procedures and audits. All books and records shall be maintained in such form and detail as may be required by applicable law. The Administrator shall oversee the maintenance of all books and records with respect to the Fund's securities transactions and the Fund's book of account in accordance with all applicable federal and state laws and regulations. The Administrator, at its expense, shall supply the Board of Trustees and officers of the Trust with all statistical information and reports reasonably required by it and reasonably available to the Administrator and furnish the Fund with office facilities, including space, furniture and equipment and all personnel reasonably necessary for the operation of the Fund. In compliance with the requirements of Rule 31a-3 under the Act, the Administrator hereby agrees that any records which it maintains for the Fund are the property of the Fund and further agrees to surrender promptly to the Fund any of such records upon the Fund's request. The Administrator further agrees to arrange for the preservation of the records required to be maintained by Rule 31a-1 under the Act for the periods prescribed by Rule 31a-2 under the Act. The Administrator covenants and agrees that it will maintain, or will otherwise have available to it, facilities and staff, including managerial, administrative and technical, as shall be necessary and adequate, in all material respects, to perform properly its obligations hereunder. 3. EXPENSES OF THE FUND. The Administrator assumes and shall pay for maintaining its staff and personnel, and shall at its own expense provide the equipment, office space and facilities necessary to perform its obligations under this Agreement. In addition, the Administrator assumes and shall pay all ordinary expenses of the Fund, including, without limitation: (a) organizational costs, (b) compensation of the Investment Adviser's personnel and payment of other expenses in connection with provision of portfolio management services, (c) compensation of any of the Trust's trustees, officers or employees who are not interested persons of the Investment Adviser or its affiliates, (d) fees and expenses of registering the Fund's shares under the federal securities laws and of qualifying its shares under applicable state Blue Sky laws, including expenses attendant upon renewing such registrations and qualifications, (e) insurance premiums, (f) fidelity bonds, (g) accounting and bookkeeping costs and expenses necessary to maintain the Fund's books and records, (h) outside auditing and ordinary legal expenses, (i) all costs associated with shareholders meetings and the preparation and dissemination of proxy solicitation materials, (j) costs of printing and distribution of the Fund's Prospectus and other shareholder information to existing shareholders, (k) charges, if any, of custodian and dividend disbursing agent's fees, (l) industry association fees, and (m) costs of independent pricing services and calculation of daily net asset value. The Administrator may, at its discretion, assume any additional expenses ordinarily assumed by the Fund when it determines that such action is in the best interest of the shareholders. Any extraordinary and non-recurring expenses shall be paid by the Fund. 4. COMPENSATION. As compensation for the services rendered, the facilities furnished and the expenses assumed by the Administrator, the Fund shall pay to the Administrator, in arrears, within ten days after the end of each calendar month, a fee, accrued each calendar day (including weekends and holidays) at a rate of 0.50% per annum of the Fund's average daily net assets up to $50 million, 0.45% of such assets from $50 million to $200 million, 0.40% of such assets from $200 million to $500 million, 0.35% of such assets from $500 million to $1 billion, and 0.30% of such assets in excess of $1 billion for such month as determined and computed in accordance with the description of the method of determination of net asset value contained in the Fund's Prospectus and Statement of Additional Information. 5. EXPENSE LIMITATION. If, in any fiscal year, the aggregate expenses of the Fund (including advisory, administrative and transfer agency fees, but excluding interest, local, state and federal taxes), exceed the expense limitations of any state having jurisdiction over the Fund, then the fee paid to the Administrator hereunder will be reduced pro rata (but not below zero) to the extent required by such expense limitation. The Administrator will bear its pro rata share of any such fee reduction based on the percentage that the Administrator's fee bears to the total administrative and advisory fees paid by the Fund to the Administrator and to the investment adviser of the Fund, for the month and year in which this Agreement becomes effective or terminates, there shall be an appropriate proration of said fee reduction based on the number of days that the Agreement is in effect during such month and year, respectively. 6. INSPECTION OF BOOKS AND RECORDS. Manager shall, upon reasonable notice, permit the Fund and its duly authorized representatives to inspect and to audit, for any purposes whatsoever, all of the books of account, documents, records, papers and files in the custody or possession of the Administrator relating in any manner to the business of the Fund. All expenses involved in such audit or inspection will be borne by the Fund. 7. INDEPENDENT CONTRACTOR. The Administrator is for all purposes hereunder an independent contractor, free from control, direction or supervision of the Trust and any persons engaged by the Administrator in the performance of the Administrator's duties hereunder are solely the employees or agents of the Administrator. The parties hereto intend and contemplate that their relationship shall not be construed, nor shall any provision of this Agreement be interpreted, so as to create a partnership or joint venture between them or their respective successors in interest and, except as expressly provided or authorized, neither party shall have the authority to act for, represent or bind the other or otherwise be deemed an agent of the other. 8. ACTIVITIES OF THE ADMINISTRATOR. The services of the Administrator to the Fund hereunder are not to be deemed exclusive and the Administrator shall be free to render similar services to others. Subject to, and in accordance with the Declaration of Trust and By-Laws of the Trust and Section 10(a) of the Act, it is understood that trustees, officers, agents and beneficial holders of the Trust are or may be "interested persons" (as defined in the Act) of the Administrator of its affiliates, and that directors, officers, agents or shareholders of the Administrator of its affiliates are or may be "interested persons" of the Trust as beneficial holders or otherwise. 9. LIMITATION OF LIABILITY. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of the Administrator, the Administrator shall not be liable to the Fund or to any beneficial holder of the Fund for any act or omission in the course of, or in connection with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. 10. TERM. This Agreement shall become effective on the date hereof, and shall continue in effect for one year and from year to year thereafter only so long as specifically approved annually by the Trust's Board of Trustees, including a majority of the Trustees who are not parties to the Agreement or "interested persons" (as defined in the Act) of any such party cast in person at a meeting called for the purpose of voting on such approval. 11. TERMINATION. This Agreement may be terminated at any time without the payment of any penalty (i) by the Fund either by vote of the Board of Trustees of the Trust or by vote of a majority of the outstanding voting securities of the Fund, on 60 days written notice to the Administrator, or (ii) by the Administrator on 60 days written notice to the Fund. 12. AMENDMENTS. This Agreement may be amended by the parties only if such amendment is specifically approved by the Board of Trustees of the Trust, including a majority of those trustees of the Trust who are not parties to this Agreement or interested persons of any such party cast in person at a meeting called for the purpose of voting on such approval. 13. NOTICES. Any notice required or desired to be given hereunder shall be in writing and shall be considered effective (i) when delivered, if by personal delivery, (ii) upon receipt, if sent by FAX, which FAX has been telephonically confirmed, between the hours of 9:00 a.m. and 5:00 p.m. local time of the recipient on a business day, or if not, at 9:00 a.m., local time on the next business day, or (iii) upon the earlier of actual or first attempted delivery, if mailed, postage prepaid, addressed as follows: If to the Administrator: Berkshire Capital Holdings, Inc. 475 Milan Drive, Suite #103 San Jose, California 95134-2453 FAX No.: (408) 562-6501 Telephone No.: (408) 526-0707 If to the Trust: The Berkshire Funds 475 Milan Drive, Suite #103 San Jose, California 95134-2453 FAX No.: (408) 562-6501 Telephone No.: (408) 526-0707 or to such other address as the party shall have furnished in writing in accordance with the provisions of this Section 13. 14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof, and supersedes all prior negotiations or agreements, whether written or oral. 15. INUREMENT. This Agreement shall inure to the benefit of and be binding upon the Fund, the Administrator, and their respective successors, transferees and assigns. 16. ASSIGNMENT. Except as otherwise expressly provided herein, the rights and obligations of the parties pursuant to this Agreement may not be assigned without the express written consent of the other party. 17. SEVERABILITY. If any provision of this Agreement shall be held, declared or pronounced void, voidable, invalid, unenforceable or inoperative for any reason by any court of competent jurisdiction, such holding, declaration or pronouncement shall not adversely affect any other provision of this Agreement, and this Agreement shall otherwise remain in full force and effect and be enforced in accordance with its terms, including in a manner that may be reasonably required in order to render any provision that has been held, declared or pronounced void, voidable, invalid, unenforceable or inoperative to become valid, enforceable and operative. 18. COUNTERPARTS. This Agreement shall be executed in counterparts, in which case all such counterparts shall constitute one and the same agreement. 19. GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the laws of the State of California. 20. ATTORNEYS' FEES. In the event any proceeding is brought by one party against the other to enforce or for the breach of any of the provisions of this Agreement, the prevailing party shall be entitled in such proceeding and in any appeal therefrom to recover reasonable attorneys' fees, together with the costs of such proceeding therein incurred. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date first written above. ATTEST: THE BERKSHIRE FUNDS By: /s/ Ronald G. Seger By: /s/ Malcolm R. Fobes III ------------------- ------------------------ Ronald G. Seger Malcolm R. Fobes III Secretary President ATTEST: BERKSHIRE CAPITAL HOLDINGS, INC. By: /s/ Ronald G. Seger By: /s/ Malcolm R. Fobes III ------------------- ------------------------ Ronald G. Seger Malcolm R. Fobes III Secretary Chairman & CEO John F. Splain, Esq. 4555 Lake Forest Drive 650 Westlake Center Cincinnati, Ohio 45242 (513) 563-3500 December 22, 1999 The Berkshire Funds 475 Milan Drive, Suite #103 San Jose, California 95134 Gentlemen: You have requested my opinion in connection with the registration by The Berkshire Funds, a Delaware business trust (the "Trust"), of an indefinite number of shares of beneficial interest (the "Shares") of its two series, the Berkshire Focus Fund and the Berkshire Technology Fund, authorized by the Trust's Declaration of Trust, to be filed with the Securities and Exchange Commission as an exhibit to the Trust's registration statement on Form N-1A (File No. 333-21089), as amended (the "Registration Statement"), under the Securities Act of 1933 and the Investment Company Act of 1940. I have examined and relied upon originals or copies, certified or otherwise identified to my satisfaction, of such records, agreements, documents and other instruments and certificates or comparable documents of public officials and of officers and representatives of the Trust, and I have made such inquiries of the officers and representatives of the Trust, as I have deemed relevant and necessary as the basis for the opinion hereinafter set forth. In such examination, I have assumed, without independent verification, the genuineness of all signatures (whether original or photostatic) and the authenticity of all documents submitted to me as originals and the conformity to authentic original documents of all documents submitted to me as certified or photostatic copies. As to all questions of fact material to such opinion, I have relied upon the certificates referred to hereinabove. I have assumed, without independent verification, the accuracy of the relevant facts stated therein. This letter expresses by opinion as to the provisions of the Trust's Declaration of Trust and the laws of the State of Delaware applying to business trusts generally, but does not extend to federal securities or other laws or the laws of jurisdictions outside the State of Delaware. Based on the foregoing, and subject to the qualifications set forth herein, I am of the opinion that the Shares have been duly and validly authorized, and, when issued and delivered as described in the Registration Statement, will be fully paid and nonassessable by the Trust. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving such consent, I do not thereby admit that I come within the category of persons whose consent is required under Section 7 of the Securities and Exchange Commission promulgated thereunder. Very truly yours, /s/ John F. Splain - - ------------------ John F. Splain Counsel CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports dated January 10, 1999 and to all references to our firm included in or made a part of this Post-Effective Amendment No. 5 to Berkshire Funds' Registration Statement on Form N-1A (file no. 333-21089), including the references to our firm under the heading "Financial Highlights" in the Prospectus and heading "Accountants" in the Statement of Additional Information. /s/ McCurdy & Associates - - ------------------------ McCurdy & Associates CPA's, Inc. Westlake, Ohio December 22, 1999 -----END PRIVACY-ENHANCED MESSAGE-----